RCON 0001410578-25-000592 6-K as filed: Mar 31, 2025

Recon Technology, Ltd_2024-12-31

Exhibit 99.1

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(UNAUDITED)


	As of June 30,		As of December 31,		As of December 31,
	2024		2024		2024
	RMB		RMB		US Dollars
ASSETS
Current assets
Cash	¥	109,991,674	¥	145,284,391	$	19,903,880
Restricted cash		848,936		8,123		1,113
Short-term investments		88,091,794		—		—
Notes receivable		1,341,820		3,206,733		439,321
Accounts receivable, net		38,631,762		40,366,074		5,530,129
Inventories, net		1,128,912		1,541,020		211,119
Other receivables, net		3,352,052		3,934,865		539,074
Other receivables - related parties		275,976		279,976		38,357
Loans to third parties		208,928,370		231,952,064		31,777,302
Purchase advances, net		5,156,550		9,485,972		1,299,573
Contract costs, net		48,335,817		41,628,922		5,703,139
Prepaid expenses		401,586		696,877		95,471
Deferred offering cost		—		810,082		110,981
Total current assets		506,485,249		479,195,099		65,649,459

Property and equipment, net		22,137,940		20,859,877		2,857,791
Construction in progress		219,132		1,144,095		156,740
Long-term loan to third parties		—		18,500,000		2,534,490
Operating lease right-of-use assets, net (including ¥1,769,840 and ¥1,269,146 ($173,872) from related parties as of June 30, 2024 and December 31, 2024, respectively)		23,547,193		22,014,961		3,016,037
Total Assets	¥	552,389,514	¥	541,714,032	$	74,214,517

LIABILITIES AND EQUITY

Current liabilities
Short-term bank loans	¥	12,425,959	¥	11,582,636	$	1,586,815
Accounts payable		10,187,518		14,100,871		1,931,811
Other payables		2,769,685		1,559,371		213,633
Other payable- related parties		2,299,069		1,787,315		244,861
Contract liabilities		1,820,481		4,098,136		561,442
Accrued payroll and employees’ welfare		3,237,164		3,416,373		468,041
Taxes payable		993,365		1,685,496		230,912
Short-term borrowings - related parties		10,002,875		10,018,208		1,372,489
Operating lease liabilities - current (including ¥1,775,114 and ¥1,832,236 ($251,015) from related parties as of June 30, 2024 and December 31, 2024, respectively)		3,741,247		3,891,976		533,198
Total Current Liabilities		47,477,363		52,140,382		7,143,202

Operating lease liabilities - non-current (including ¥335,976 and ¥119,411 ($16,359) from related parties as of June 30, 2024 and December 31, 2024, respectively)		3,971,285		2,781,196		381,022
Long-term borrowings - related party		10,000,000		10,000,000		1,369,994
Warrant liability - non-current		6,969		17,504		2,398
Total Liabilities	¥	61,455,617	¥	64,939,082	$	8,896,616

Commitments and Contingencies

Shareholders’ Equity
Class A Ordinary Shares, $0.0001 US dollar par value, 500,000,000 shares authorized; 7,987,959 shares and 7,987,959 shares issued and outstanding as of June 30, 2024 and December 31, 2024, respectively		99,634		99,634		13,650
Class B Ordinary Shares, $0.0001 US dollar par value, 80,000,000 shares authorized; 7,100,000 shares and 20,000,000 shares issued and outstanding as of June 30, 2024 and December 31, 2024, respectively		4,693		14,038		1,923
Additional paid-in capital		681,476,717		686,830,523		94,095,396
Statutory reserve		4,148,929		4,148,929		568,401
Accumulated deficit		(220,312,085)		(240,900,414)		(33,003,221)
Accumulated other comprehensive income		37,136,649		38,344,150		5,253,127
Total Recon Technology, Ltd’ equity		502,554,537		488,536,860		66,929,276
Non-controlling interests		(11,620,640)		(11,761,910)		(1,611,375)
Total shareholders’ equity		490,933,897		476,774,950		65,317,901
Total Liabilities and Shareholders’ Equity	¥	552,389,514	¥	541,714,032	$	74,214,517

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

F-1

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)


	For the six months ended
	December 31,
	2023		2024		2024
	RMB		RMB		USD

Revenue		45,256,672		42,069,270		5,763,466
Cost of revenue		33,150,930		28,714,468		3,933,866
Gross profit		12,105,742		13,354,802		1,829,600

Selling and distribution expenses		4,547,115		5,177,944		709,375
General and administrative expenses		22,042,042		24,038,744		3,293,294
Allowance for credit losses		1,553,364		870,714		119,287
Research and development expenses		6,765,287		10,167,182		1,392,898
Operating expenses		34,907,808		40,254,584		5,514,854

Loss from operations		(22,802,066)		(26,899,782)		(3,685,254)

Other income (expenses)
Subsidy income		131,428		21,045		2,883
Interest income		12,060,640		7,136,259		977,663
Interest expense		(1,683,289)		(580,977)		(79,594)
Loss in fair value changes of warrants liability		(1,941,195)		(10,327)		(1,415)
Foreign exchange transaction loss		(76,040)		(313,263)		(42,917)
Other expenses		(8,701,288)		(80,945)		(11,088)
Other income, net		(209,744)		6,171,792		845,532
Loss before income tax		(23,011,810)		(20,727,990)		(2,839,722)
Income tax expenses		96,041		1,609		220
Net loss		(23,107,851)		(20,729,599)		(2,839,942)

Less: Net loss attributable to non-controlling interests		(553,829)		(141,270)		(19,354)
Net loss attributable to Recon Technology, Ltd	¥	(22,554,022)	¥	(20,588,329)	$	(2,820,588)

Comprehensive income (loss)
Net loss		(23,107,851)		(20,729,599)		(2,839,942)
Foreign currency translation adjustment		(4,609,399)		1,207,501		165,427
Comprehensive loss		(27,717,250)		(19,522,098)		(2,674,515)
Less: Comprehensive loss attributable to non- controlling interests		(553,829)		(141,270)		(19,354)
Comprehensive loss attributable to Recon Technology, Ltd	¥	(27,163,421)	¥	(19,380,828)	$	(2,655,161)

Loss per share - basic and diluted	¥	(8.27)	¥	(2.29)	$	(0.31)

Weighted - average shares -basic and diluted		2,728,056		8,978,328		8,978,328

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

F-2

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)


													Accumulated		Total
							Additional						Other		Recon				Total		Total
							Paid-in		Statutory		Accumulated		Comprehensive		Technology,		Non-controlling		shareholders’		shareholders’
	Ordinary Shares						Capital*		Reserve		deficit		income		Ltd’ Equity		Interests		Equity		Equity
	Number of			Number of
	Class A	Amount		Class B	Amount
	Shares*	(RMB)*		Shares	(RMB)*		(RMB)		(RMB)		(RMB)		(RMB)		(RMB)		(RMB)		(RMB)		(USD)

Balance, June 30, 2023	2,306,295		26,932	7,100,000		4,693		580,340,061		4,148,929		(170,440,826)		35,127,173		449,206,962		(10,056,059)		439,150,903		60,163,428

Restricted shares issued for services	—		—	—		—		1,070,143		—		—		—		1,070,143		—		1,070,143		146,609
Proceeds from Pre-Funded warrants	65,278		859	—		—		(859)		—		—		—		—		—		—		—
Restricted shares issued for management	—		—	—		—		2,866,560		—		—		—		2,866,560		—		2,866,560		392,717
Net loss for the period	—		—	—		—		—		—		(22,554,022)		—		(22,554,022)		(553,829)		(23,107,851)		(3,165,763)
Foreign currency translation adjustment	—		—	—		—		—		—		—		(4,609,399)		(4,609,399)		—		(4,609,399)		(631,485)
Balance, December 31, 2023	2,371,573	¥	27,791	7,100,000	¥	4,693	¥	584,275,905	¥	4,148,929	¥	(192,994,848)	¥	30,517,774	¥	425,980,244	¥	(10,609,888)	¥	415,370,356	$	56,905,506


Balance, June 30, 2024	7,987,959		99,634	7,100,000		4,693		681,476,717		4,148,929		(220,312,085)		37,136,649		502,554,537		(11,620,640)		490,933,897		67,257,669

Capital contribution in controlling interests	—		—	—		—		10,000		—		—		—		10,000		—		10,000		1,370
Restricted shares issued for management	—		—	12,900,000		9,345		5,343,806		—		—		—		5,353,151		—		5,353,151		733,376
Net loss for the period	—		—	—		—		—		—		(20,588,329)		—		(20,588,329)		(141,270)		(20,729,599)		(2,839,941)
Foreign currency translation adjustment	—		—	—		—		—		—		—		1,207,501		1,207,501		—		1,207,501		165,427
Balance, December 31, 2024	7,987,959	¥	99,634	20,000,000	¥	14,038	¥	686,830,523	¥	4,148,929	¥	(240,900,414)	¥	38,344,150	¥	488,536,860	¥	(11,761,910)	¥	476,774,950	$	65,317,901

*Retrospectively restated for the 1-for-18 reverse share split on May 1, 2024 and change in capital structure on March 29, 2024.

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

F-3

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the six months ended December 31,
	2023		2024		2024
	RMB		RMB		US Dollars
Cash flows from operating activities:
Net loss	¥	(23,107,851)	¥	(20,729,599)	$	(2,839,942)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,426,971		1,724,066		236,196
Loss from disposal of equipment		32,252		9,607		1,316
Gain in fair value changes of warrants liability		10,461,075		10,327		1,415
Allowance for credit losses		1,553,364		870,714		119,287
Allowance for slow moving inventories		(350,637)		(523,228)		(71,682)
Amortization of right-of-use assets		570,959		1,532,232		209,915
Restricted shares issued for management and employees		2,866,560		5,353,151		733,376
Restricted shares issued for services		1,070,143		—		—
Accrued interest income from loans to third parties		(4,415,298)		(6,779,697)		(928,815)
Accrued interest income from short-term investment		(2,352,250)		—		—
Changes in operating assets and liabilities:
Notes receivable		(8,790,327)		(1,864,913)		(255,492)
Accounts receivable		(4,412,034)		(3,348,819)		(458,786)
Inventories		4,863,435		(718,490)		(98,433)
Other receivables		5,465,227		(358,057)		(49,051)
Other receivables-related parties		—		(4,000)		(548)
Purchase advances		558,040		81,256		11,132
Contract costs		10,442,916		8,057,774		1,103,911
Prepaid expense		54,734		(295,291)		(40,455)
Operating lease liabilities		(2,027,067)		(1,039,360)		(142,392)
Accounts payable		1,271,140		3,913,353		536,127
Other payables		(4,103,150)		(1,194,817)		(163,689)
Other payables-related parties		(383,378)		(511,754)		(70,110)
Contract liabilities		2,140,385		2,277,655		312,037
Accrued payroll and employees’ welfare		17,399		179,209		24,552
Taxes payable		537,591		691,901		94,790
Net cash used in operating activities		(6,609,801)		(12,666,780)		(1,735,341)

Cash flows from investing activities:
Purchases of property and equipment		(216,082)		(455,380)		(62,387)
Proceeds from disposal of equipment		20,000		—		—
Purchase of land use right		(15,000,251)		—		—
Collection of loans to third parties		44,613,948		2,904,352		397,895
Payments made for loans to third parties		(16,600,000)		(36,897,900)		(5,054,992)
Payments and prepayments for construction in progress		—		(5,337,873)		(731,286)
Payments for short-term investments		(131,598,400)		—		—
Redemption of short-term investments		180,338,865		88,892,092		12,178,167
Net cash generated by investing activities		61,558,080		49,105,291		6,727,397

Cash flows from financing activities:
Repayments of short-term bank loans		(123,000)		(843,487)		(115,557)
Proceeds from short-term borrowings-related parties		10,000,000		—		—
Repayments of short-term borrowings-related parties		(10,018,222)		—		—
Deferred offering costs		—		(810,082)		(110,981)
Redemption of warrants		(31,866,604)		—		—
Capital contribution by controlling shareholders		—		10,000		1,370
Net cash used in financing activities		(32,007,826)		(1,643,569)		(225,168)

Effect of exchange rate fluctuation on cash and restricted cash		(5,945,117)		(343,038)		(46,996)

Net increase in cash and restricted cash		16,995,336		34,451,904		4,719,892
Cash and restricted cash at beginning of period		104,857,345		110,840,610		15,185,101
Cash and restricted cash at end of period	¥	121,852,681	¥	145,292,514	$	19,904,993

Supplemental cash flow information
Cash paid during the period for interest	¥	468,440	¥	518,086	$	133,730
Cash paid during the period for taxes	¥	16,505	¥	1,363,403	$	294,729

Reconciliation of cash and restricted cash, beginning of period
Cash	¥	104,125,800	¥	109,991,674	$	15,068,797
Restricted cash		731,545		848,936		116,304
Cash and restricted cash, beginning of period	¥	104,857,345	¥	110,840,610	$	15,185,101

Reconciliation of cash and restricted cash, end of period
Cash	¥	121,848,777	¥	145,284,391	$	19,903,880
Restricted cash		3,904		8,123		1,113
Cash and restricted cash, end of period	¥	121,852,681	¥	145,292,514	$	19,904,993

Non-cash investing and financing activities
Right-of-use assets obtained in exchange for operating lease obligations	¥	298,783	¥	—	$	—

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

F-4

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS

Organization – Recon Technology, Ltd (the “Company”, “We” or “Our”) was incorporated under the laws of the Cayman Islands on August 21, 2007 as a limited liability company. By far, the Company provides specialized equipment, automation systems, tools, chemicals, outsourcing platform services and field services to energy industry companies mainly in the People’s Republic of China (the “PRC”).

VIEs:

The Company, along with its wholly-owned subsidiaries Recon Investment Ltd. (“Recon-IN”) and Recon Hengda Technology (Beijing) Co., Ltd. (“Recon-BJ”), conducts its business through the following PRC legal entities (“Domestic Companies”) that operate in the Chinese energy industry:

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

Nanjing Recon Technology Co., Ltd. (“Nanjing Recon”).

The Company has signed Exclusive Technical Consulting Service Agreements with each of the Domestic Companies, and Equity Interest Pledge Agreements and Exclusive Equity Interest Purchase Agreements with their shareholders (collectively the “VIE Agreements”). Pursuant to these VIE Agreements, the Company has the ability to substantially influence each of the Domestic Companies’ daily operations and financial affairs, appoint their senior executives and approve all matters requiring shareholder approval. The VIE agreements are designed to render the Company as the primary beneficiary of and entitle the Company of rights to consolidate each Domestic Company for accounting purposes. We believe that the Domestic Companies should be treated as Variable Interest Entities (“VIEs”) under the Statement of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 Consolidation and we are regarded as the primary beneficiary of the VIEs.

On February 21, 2019, the Company’s board of directors approved transferring the VIEs and VIE-controlled companies from Jining Recon Technology Ltd. (“Recon-JN”) to Recon-BJ. At the time, both Recon-JN and Recon-BJ were the Company’s wholly owned subsidiaries in China. On April 1, 2019, the Company completed the VIE transfer process and then completed the dissolution of Recon-JN on April 10, 2019, and subsequently completed the dissolution of Recon Technology Co., Limited (“Recon-HK”) on May 15, 2020. The Company does not expect any negative impact of this process on its operations.

On December 17, 2015, Huang Hua BHD Petroleum Equipment Manufacturing Co., Ltd (“HH BHD”), a fully owned subsidiary established by BHD was organized under the laws of the PRC, focusing on the design, assemble and manufacture of heating equipment.

Gan Su BHD Environmental Technology Co., Ltd (“Gan Su BHD”) was established on May 23, 2017, with registered capital of ¥50.0 million. The paid in capital was ¥27,495,000 ($3,766,800) as of December 31, 2024. BHD owned an equity interest of 49% of Gan Su BHD, and the remaining 51% equity interests was owned by an individual shareholder upon incorporation of Gan Su BHD. On September 25, 2017, the individual shareholder became the minority shareholder by transferring 2.0% equity shares to BHD. On April 26, 2021, the minority shareholder of Gan Su BHD transferred 15.4% of her equity interest to BHD. On May 19, 2021, the minority shareholder transferred 3.6% of her equity interest and BHD transferred 15.4% of its equity interest of Gan Su BHD to Nanjing Recon. There was no consideration paid for the transfers, and after the transfers, BHD owns equity an interest of 51% and Nanjing Recon owns an equity interest of 19% of Gan Su BHD, which is focusing on oilfield sewage treatment and oily sludge disposal projects.

Qing Hai BHD New Energy Technology Co., Ltd. (“Qinghai BHD”) was established on October 16, 2017, with registered capital of ¥50.0 million. The paid in capital was ¥4,200,000 ($575,398) as of December 31,2024. BHD owned an equity interest of 55% of Qinghai BHD previously; however, based on an agreement signed by the shareholders of Qinghai BHD dated October 23, 2018, each of the other two individual shareholders agreed to reduce 10% of their equity interests. As a result, Qinghai BHD returned ¥200,000 paid in capital back to one of the individual shareholders. After the new arrangement, BHD owns a total interest of 75% of Qinghai BHD. The remaining paid in capital should be contributed by BHD and the other individual shareholder is ¥33,300,000 ($4,562,081) and ¥12,500,000 ($1,712,493) respectively. Based on the requirements of the Company Law of China, the remaining capital will be injected before June 30, 2032.

F-5

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As the energy consumption market opened to private and foreign companies, and online payment technology developed, the Domestic Companies began to invest in the downstream of the oil industry. On December 15, 2017, BHD and Nanjing Recon entered into a subscription agreement with Future Gas Station (Beijing) Technology, Ltd (“FGS”), pursuant to which the Domestic Companies acquired an 8% equity interest in FGS. Established in January 2016, FGS is a service company focusing on providing new technical applications and data operations to gas stations and provides solutions to gas stations to improve their operations and their customers’ experience. On August 21, 2018, the Domestic Companies entered into an investment agreement and a supplemental agreement (collectively, the “Investment Agreement”) with FGS and the other shareholders of FGS. Pursuant to the Investment Agreement, our VIEs’ ownership interest in FGS shall increase from 8% to 43%, in exchange for their investment in FGS for a total amount of ¥10.0 million in cash and the issuance of 487,057 (27,059 shares post 2024 Reverse Split) restricted Class A Ordinary Shares to the other shareholders of FGS with certain conditions. As of June 30, 2019, the Domestic Companies invested an aggregate amount of ¥35,116,707 in FGS and issued 487,057 (27,059 shares post 2024 Reverse Split) restricted shares in total to other shareholders of FGS, and the Domestic Companies’ ownership interest in FGS has increased to 43%. On February 4, 2021, Nanjing Recon and BHD, entered into the fourth supplemental agreement to the investment agreement with FGS and FGS’ founding shareholders to acquire 8% equity ownership of FGS. The transaction has been closed. As a result, the Domestic Companies collectively own 51% interest of FGS and began to consolidate the financial results of FGS since January 2021. Through the fourth supplemental agreement, the Domestic Companies waived the requirement on FGS’ performance goal about the number of gas stations. Accordingly, the Domestic Companies agreed to pay for the balance of the investment and cancelled the related lock-up terms on the restricted shares, in exchange of the additional 8% equity ownership of FGS.

The VIE contractual arrangements

The Company’s main operating entities, the Domestic Companies, are controlled through contractual arrangements by the Company.

A VIE is an entity which has a total equity investment that is insufficient to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary of, and must consolidate, the VIE, because it met the condition under accounting principles generally accepted in the United States of America (“U.S. GAAP”) to consolidate the VIE.

The Company is deemed to have a controlling financial interest in and be the primary beneficiary of the Domestic Companies because it has both of the following characteristics:

●

The power to direct activities of the Domestic Companies that most significantly impact such entities’ economic performance, and

●

The obligation to absorb losses of, and the right to receive benefits from, the Domestic Companies that could potentially be significant to such entities.

Pursuant to these contractual arrangements, the Domestic Companies shall pay service fees equal to all of their net profit after tax payments to the Company. Accordingly, the Company has the right to absorb 90% of net interest or 100% of net loss of those Domestic Companies for accounting purposes. Such contractual arrangements are designed so that the operations of the Domestic Companies are solely for the benefit of the Company, and therefore the Company must consolidate the Domestic Companies under U.S. GAAP.

Risks associated with the VIE structure

The Company believes that the contractual arrangements with the VIEs and the shareholders of the VIEs are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:

●

revoke the business and operating licenses of the Company’s PRC subsidiary and the VIEs;

●

discontinue or restrict the operations of any related-party transactions between the Company’s PRC subsidiary and the VIEs;

F-6

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

●

limit the Company’s business expansion in China by way of entering into contractual arrangements;

●

impose fines or other requirements with which the Company’s PRC subsidiary and the VIEs may not be able to comply;

●

require the Company or the Company’s PRC subsidiary and the VIEs to restructure the relevant ownership structure or operations; or

●

restrict or prohibit the Company’s use of the proceeds from public offering to finance the Company’s business and operations in China.

The Company’s ability to conduct its businesses may be negatively affected if the PRC government were to carry out of any of the aforementioned actions. As a result, the Company may not be able to consolidate the VIEs in its consolidated financial statements as it may lose the ability to exercise its rights as the primary beneficiary over the VIEs and it may lose the ability to receive economic benefits from the VIEs. The Company, however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiary and the VIEs. There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Company or its subsidiaries to provide financial support to the VIEs and the VIEs’ subsidiaries. However, when the VIEs and the VIEs’ subsidiaries ever need financial support, the Company or its subsidiaries has, at its option and subject to statutory limits and restrictions, provided financial support to the VIEs and the VIEs’ subsidiaries through loans to the VIEs and the VIEs’ subsidiaries.

Non-VIEs:

The Company, along with its wholly-owned subsidiaries, Recon Investment Ltd. (“Recon-IN”) and the following PRC legal entities that operate in the Chinese chemical recycling industry:

Shandong Recon Renewable Resources Technology Co., Ltd. (“Recon-SD”)

Guangxi Recon Renewable Resources Co., Ltd. (“Recon-GX”)

On October 10, 2023, Shandong Recon Renewable Resources Technology Co., Ltd (“Recon-SD”) was established by Recon-IN as its fully owned subsidiary, with a registered capital of $30.0 million. The paid in capital was $10.0 million as of December 31, 2024. Shandong Recon focuses on the plastic chemical cycles business. On February 22, 2024, Guangxi Recon Renewable Resources Co., Ltd. (“Recon-GX”) was established by Recon-IN as its fully owned subsidiary established, with a registered capital of $30.0 million. Recon-GX focuses on the plastic chemical cycles business. The paid in capital was $1.0 million as of December 31, 2024.

Nature of Operations – The Company engages in (1) providing equipment, tools and other components and parts related to oilfield production and other energy industries companies, including simple installations in connection with some projects; (2) providing services to improve production and efficiency of exploited oil wells, (3) developing and selling its own specialized industrial automation control and information solutions, (4) designing, testing and implementing solution of sewage and oily sludge treatment, production and sales of related integrated equipment and project services, (5) developing, upgrading and maintaining the online operation and cooperation platform of gas stations, marketing and promotion services, and (6) plastic chemical cycles business, etc.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP and are expressed in United States dollars (“US dollars”).

Principles of Consolidation – The consolidated financial statements include the accounts of the Company, all the subsidiaries, VIEs and subsidiaries of VIEs of the Company. All transactions and balances between the Company and its subsidiaries and VIEs have been eliminated upon consolidation.

F-7

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

We consolidate all subsidiaries in which we have a controlling financial interest and variable interest entities (“VIEs”) for which we or one of our consolidated subsidiaries is the primary beneficiary. Control generally equates to ownership percentage, whereby (i) affiliates that are more than 50% owned are consolidated; (ii) investments in affiliates of 50% or less but greater than 20% are generally accounted for using the equity method where we have determined that we have significant influence over the entities; and (iii) investments in affiliates of 20% or less are generally accounted for using the cost method.

We consolidate a VIE when we have both the power to direct the activities that most significantly impact the results of the VIE and the right to receive benefits or the obligation to absorb losses of the entity that could be potentially significant to the VIE. Along with the VIEs that are consolidated in accordance with the above guidelines, we also hold variable interests in other VIEs that are not consolidated because we are not the primary beneficiary. We continually monitor both consolidated and unconsolidated VIEs to determine if any events have occurred that could cause the primary beneficiary to change. A change in determination could have a material impact on our financial statements.

Variable Interest Entities - A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary. The primary beneficiary has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The Company performs ongoing assessments to determine whether an entity should be considered a VIE and whether an entity previously identified as a VIE continues to be a VIE and whether the Company continues to be the primary beneficiary.

Assets recognized as a result of consolidating VIEs do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of the consolidated VIEs.

Currency Translation - The Company’s functional currency is US dollars and the consolidated financial statements have been expressed in Chinese Yuan (“RMB”) as RMB is the Company’s reporting currency. The consolidated financial statements as of and for the six months ended December 31, 2024 have been translated into US dollars solely for the convenience of the readers. The translation has been made at the rate of ¥7.2993 = US$1.00, the approximate exchange rate prevailing on December 31, 2024. These translated US dollar amounts should not be construed as representing Chinese Yuan amounts or that the Chinese Yuan amounts have been or could be converted into US dollars.

Estimates and Assumptions - The preparation of the consolidated financial statements in conformity with US GAAP, which requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Estimates are adjusted to reflect actual experience when necessary. Significant accounting estimates reflected in the Company’s consolidated financial statements include allowance for credit losses related to accounts receivable, other receivables and purchase advances, allowance for inventory, the useful lives of property and equipment, valuation allowance for deferred tax assets, impairment assessment for long-lived assets, goodwill and investment in unconsolidated entity, the discount rate for lease and investment, valuation of the convertible notes, price purchase allocation for business combination and the fair value of share-based payments. The use of estimates is an integral component of the financial reporting process; actual results could differ from those estimates.

The key assumptions underlying the Company’s accounting for material arrangements and the reasonably likely material effects of resolving any uncertainties on the Company’s allowance for credit losses related to purchase advances. The production of the Company’s products requires custom-made equipment from its suppliers. To ensure that it can secure the required customized equipment, the Company often needs to make full prepayment for its intended purchases. As a standard practice in the petroleum extraction industry, the Company generally must submit a bid in order to secure the sales contract. The bidding process generally takes between one month to one year and the timing depends on the size of the overall project, which timing and size are generally controlled by its client. In order to secure timely purchase delivery and to meet its product delivery schedule, the Company normally prepays for the purchase advances if the Company believes that it is more than likely to win the bid for the sales contract which is accounted as pre-contract costs. After winning the bid and securing the sale contract, the Company normally needs to deliver its products approximately within one week to six months. Based on the Company’s historical experience, the Company generally is able to realize its purchase advances on the customized equipment that it orders. If it subsequently confirms that the Company is unable to secure the planned contracts with a customer after making the advance payments for these planned contracts, the Company evaluates the probable recoverability of the pre-contract cost and charges to expenses when the Company determines that the recovery of such pre-contract cost is improbable.

F-8

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Fair Values of Financial Instruments - The U.S. GAAP accounting standards regarding fair value of financial instruments and related fair value measurements define fair value, establish a three-level valuation hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The three levels of inputs are defined as follows:

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to the valuation methodology are unobservable.

Accounting guidance also describes three main approaches to measure the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

The carrying amounts reported in the consolidated balance sheets for short-term investments, accounts receivable, notes receivable, other receivables, purchase advances, contract cost, accounts payable, other payable, accrued liabilities, contract liabilities, short-term bank loans and short-term borrowings – related parties approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amounts of the long-term borrowings due to related party approximate its fair value because the stated interest rates approximate rates currently offered by financial institutions for similar debt instruments of comparable credit risk and maturities.

Cash - Cash includes cash on hand consisting of coins, currency, undeposited checks, money orders and drafts, demand deposits in banks, certain short-term highly liquid investments and cash in transit.

Short-term investments - Short-term investments include wealth management products, which are certain deposits with fixed interest rates and the principal are guaranteed by the financial institutions. The carrying values of the Company’s short-term investments approximate fair value because of their short-term maturities within one year. The interest earned is recognized in the consolidated statements of operations and comprehensive income (loss) as interest income. As of June 30, 2024 and December 31, 2024, the Company had short-term investments balance of ¥88.1 million and nil, including accrued interests of ¥0.9 million and nil, respectively.

Accounts Receivables, Net, Other Receivables, Net and Loan to Third Parties - Accounts receivables are carried at original invoiced amount less a provision for any potential uncollectible amounts. In July 2020, the Company adopted ASU 2016-13, Topics 326-Credit Loss, Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology, as its accounting standard for its accounts receivable and other receivables. Other receivables and loan to third parties arise from transactions with non-trade customers.

The adoption of the credit loss accounting standard has no material impact on the Company’s consolidated financial statements as of July 1, 2020. Accounts receivable, other receivables and loan to third parties are recognized and carried at carrying amount less an allowance for credit loss, if any. The Company maintains an allowance for credit losses resulting from the inability of its trade and non-trade customers (“customers”) to make required payments based on contractual terms. The Company reviews the collectability of its receivables on a regular and ongoing basis. The Company has also included in calculation of allowance for credit losses. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. The Company also considers external factors to the specific customer, including current conditions and forecasts of economic conditions. In the event the Company recovers amounts previously reserved for, the Company will reduce the specific allowance for credit losses.

F-9

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

The Company evaluates the creditworthiness of all of its customers individually before accepting them and continuously monitors the recoverability of accounts receivable, other receivables and loan to third parties. If there are any indicators that a customer may not make payment, the Company may consider making provision for non-collectability for that particular customer. At the same time, the Company may cease further sales or services to such customer. The following are some of the factors that the Company considers in determining whether to discontinue sales, record as contra revenue or allowance for credit losses:

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the oil price and fluctuation of the overall oil industry;

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the customer fails to comply with its payment schedule;

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the customer is in serious financial difficulty;

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a significant dispute with the customer has occurred regarding job progress or other matters;

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the customer breaches any of the contractual obligations;

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the customer appears to be financially distressed due to economic or legal factors;

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the business between the customer and the Company is not active; and

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other objective evidence indicates non-collectability of the accounts receivable, other receivables and loan to third parties.

The Company considers the following factors when determining whether to permit a longer payment period or provide other concessions to customers:

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the customer’s past payment history;

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the customer’s general risk profile, including factors such as the customer’s size, age, and public or private status;

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macroeconomic conditions that may affect a customer’s ability to pay; and

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the relative importance of the customer relationship to the Company’s business.

Notes Receivable - Notes receivable represent short-term notes receivable the Company receives from its customers as payment for amounts owed to the Company in normal course of business operation. The notes receivables are issued by reputable financial institutions that entitle the Company to receive the full-face amount from the financial institutions at maturity, which generally ranges from three to six months from the date of issuance.

Purchase Advances, Net - Purchase advances are the amounts prepaid to suppliers for materials, services, and capital expenditures, including equipment, construction-related goods, and third-party supervision services. These amounts are initially classified as current assets (Advances to Suppliers) if expected to be settled within 12 months or non-current assets if the benefit period exceeds one year. Upon receipt of goods/services, advances are reclassified to Inventory, Property, Plant, and Equipment, or expensed as incurred. Unrecoverable advances are recognized as impairments. Significant balances are disclosed separately.

Inventories, Net - Inventories are stated at the lower of cost or net realizable value, on a first-in-first-out basis. The methods of determining inventory costs are used consistently from year to year. Market value of the inventories is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. The Company records write-downs of inventory that is obsolete or in excess of anticipated demand or market value based on consideration of product lifecycle stage, technology trends, product development plans and assumptions about future demand and market conditions. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values. Inventory write-downs are charged to cost of revenue and establish a new cost basis for the inventory.

Deferred offering costs - ASC 340-10, Deferred offering costs consisted of fees and expenses incurred in connection with the sale of the Company’s ordinary shares, including the legal, accounting, printing and other offering related costs. Upon completion of the offering, these deferred offering costs are to be reclassified from current assets to shareholders’ equity and recorded against the net proceeds from the offering. As of December 31, 2023 and 2024, deferred offering costs amounted to nil and $0.8 million, respectively.

F-10

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Property and Equipment, Net - Property and equipment are stated at cost. Depreciation on motor vehicles and office equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from two to five years. Production equipment includes Equipment and Utilities and Facilities, both of which are depreciated using the straight-line method based on the estimated useful life of the assets. The useful life of Equipment is 10 years, while the useful life of Utilities and Facilities is 20 years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the assets.


Items		Useful life
Motor vehicles		3-5 years
Office equipment and fixtures		2-5 years
Production equipment, including:
Equipment		10 years
Utilities and Facilities		20 years
Leasehold improvement		Lesser of useful life and lease term

Construction in progress includes property and equipment in the course of construction for production or for its own use purposes. Construction in progress is carried at cost less any recognized impairment loss. Construction in progress is classified to the appropriate category of property and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Goodwill - Goodwill represents the excess of the purchase price over the fair value of assets acquired. The goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit would be considered impaired. To measure the amount of the impairment loss, the implied fair value of a reporting unit’s goodwill is compared to the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. For each of these tests, the fair value of each of the Company’s reporting units is determined using a combination of valuation techniques, including a discounted cash flow methodology. To corroborate the discounted cash flow analysis performed at each reporting unit, a market approach is utilized using observable market data such as comparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available). The Company evaluates qualitative factors and overall financial performance to determine whether it is necessary to perform the first step of the two-step goodwill test. This step is referred to as “Step 0.” Step 0 involves qualitative assessment, among other qualitative factors, weighing the relative impact of factors that are specific to the reporting unit as well as industry and macroeconomic factors. After assessing those various factors, if it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the entity will need to proceed to the first step of the goodwill impairment test. Step 1 of the goodwill impairment test, used to identify potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value, which is based on future cash flows, exceeds the carrying amount, goodwill is not considered impaired. If the carrying amount exceeds the fair value, the Step 2 must be performed to measure the amount of the impairment loss, if any. The Company has adopted Accounting Standards Updates (“ASU”) 2017-04, simplifying the Test for Goodwill Impairment, which permits the Company to impair the difference between carrying amounts in excess of the fair value of the reporting unit as the reduction in goodwill. ASU 2017-04 eliminates the requirement in previous GAAP to perform Step 2 of the goodwill impairment test. The Company considers various factors in performing the qualitative test, including macroeconomic conditions, industry and market considerations, the overall financial performance of the Company’s reporting units, the Company’s share price and the excess amount or “cushion” between the Company reporting unit’s fair value and carrying value as indicated on the Company’s most recent quantitative assessment.

Intangible Assets, Net – Intangible assets is composed of customer relationship, which is measured at fair value on initial recognition. Identifiable intangible assets resulting from the acquisitions of subsidiaries accounted for using the purchase method of accounting are estimated by management based on the fair value of assets received. The Company amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these assets for impairment. The Company typically amortizes its intangible assets with definite useful lives on a straight-line basis over the shorter of the contractual terms or the estimated useful lives.

F-11

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Impairment of Long-Lived Assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined based on the estimated discounted future cash flows expected to be generated by the asset. The Company considers the events or changes in circumstances that may indicate the impairment of the Company’s long-lived assets, such as a significant decrease occurs in the market price of a long-lived asset (or asset group); a significant adverse change in the extent or manner in which a long-lived asset (or asset group) is being used or in its physical condition; a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (or asset group), including an adverse action or assessment by a regulator; an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (or asset group); a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (or asset group); and a current expectation that, more likely than not, a long-lived asset (or asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company concluded that there was no impairment for the long-lived assets for the six months ended December 31, 2023 and 2024 respectively.

Long-term Investments - ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The main provisions require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value through earnings, unless they qualify for a measurement alternative. The new guidance requires modified retrospective application to all outstanding instruments for fiscal years beginning after December 15, 2017, with a cumulative effect adjustment recorded to opening accumulated deficit as of the beginning of the first period in which the guidance becomes effective. However, changes to the accounting for equity securities without a readily determinable fair value would be applied prospectively. The Company adopted the new financial instruments accounting standard from July 1, 2018.

Equity Investments with Readily Determinable Fair Values - Equity investments with readily determinable fair values are measured and recorded at fair value using the market approach based on the quoted prices in active markets at the reporting date. The Company classifies the valuation techniques that use these inputs as Level 1 of fair value measurements.

Equity Investments without Readily Determinable Fair Values - After the adoption of this new accounting standard, the Company elected to record equity investments without readily determinable fair values and not accounted for under the equity method at cost, less impairment, adjusted for subsequent observable price changes on a nonrecurring basis, and report changes in the carrying value of the equity investments in current earnings. Changes in the carrying value of the equity investments are required to be made whenever there are observable price changes in orderly transactions for the identical or similar investment of the same issuer. The implementation guidance notes that an entity should make a “reasonable effort” to identify price changes that are known or that can reasonably be known.

Equity Investments Accounted for Using the Equity Method - The Company accounts for its equity investment over which it has significant influence but does not own a majority equity interest or otherwise control using the equity method. The Company adjusts the carrying amount of the investment and recognizes investment income or loss for share of the earnings or loss of the investee after the date of investment. The Company assesses its equity investment for other-than-temporary impairment by considering factors including, but not limited to, current economic and market conditions, operating performance of the entities, including current earnings trends and undiscounted cash flows, and other entity-specific information. The fair value determination, particularly for investment in privately held entities, requires judgment to determine appropriate estimates and assumptions. Changes in these estimates and assumptions could affect the calculation of the fair value of the investment and determination of whether any identified impairment is other-than-temporary.

An impairment charge is recorded if the carrying amount of the investment exceeds its fair value and this condition is determined to be other-than-temporary. The Company recorded no impairment loss on its equity method investment during the six months ended December 31, 2023 and 2024. The Company recorded no investment income on its equity method investment in unconsolidated entities during the six months ended December 31, 2023 and 2024, respectively.

F-12

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Business Combinations - The Company accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805 “Business Combinations”. The consideration transferred in an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations and all contractual contingencies as of the acquisition date. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total costs of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the acquiree, the difference is recognized directly in the consolidated statements of operation and comprehensive income (loss). During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operation and comprehensive income (loss).

In a business combination considered as a step acquisition, the Company remeasures the previously held equity interest in the acquiree immediately before obtaining control at its acquisition-date fair value and the re-measurement gain or loss, if any, is recognized in the consolidated statements of operation and comprehensive income (loss).

Non-controlling Interests - For the Company’s majority-owned subsidiaries, VIEs and subsidiaries of VIEs, a non-controlling interest is recognized to reflect the portion of their equity which is not attributable, directly or indirectly, to the Company. Non-controlling interests are classified as a separate line item in the equity section of the Company’s consolidated balance sheets and have been separately disclosed in the Company’s consolidated statements of operation and comprehensive income (loss) to distinguish the interests from that of the Company.

Revenue Recognition - In accordance with ASC 606, “Revenue from Contracts with Customers”, revenue is recognized when all of the following five steps are met: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; (v) recognize revenue when (or as) each performance obligation is satisfied. The core principle underlying the new revenue recognition Accounting Standards Update (“ASU”) is that the Company recognizes revenue to represent the transfer of goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. The Company identifies contractual performance obligations and determines whether revenue should be recognized at a point in time or over time, based on when goods or services are provided to a customer.

Disaggregation of Revenue

Revenue are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The following items represent the Company’s revenue disaggregated by revenue source. In accordance with ASC 606-10-50-5, the Company selects categories to present disaggregated revenue that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors and delivery conditions of products and fulfillment of obligations.

The Company’s disaggregation of revenue for the six months ended December 31, 2023 and 2024 is disclosed in Note 25.

Automation Products and Software; Equipment, Accessories and Others

The Company generates revenue primarily through delivery of standard or customized products and equipment, including automation products, furnaces and related accessories. Revenue is recognized when products are delivered, and acceptance reports are signed off by customers.

The sale of automation products or specialized equipment when combined with services represent a single performance obligation for the development and construction of a single asset. The Company may also provide design or installation services to clients as there may be such obligation in contracts. The promises to transfer the goods and provision of services are not separately identifiable, which is evidenced by the fact that the Company provides significant services of integrating the goods and services into a single deliverable for which the customer has contracted. For such sales arrangements, the Company recognizes revenue using input method, based on the relationship between actual costs incurred compared to the total estimated costs for the contract. Such method is adopted because the Company believes it best depicts the transfer of goods and services to the customer.

F-13

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Oilfield Environmental Protection Service

The Company provides wastewater treatment products and related service to oilfield and chemical industry companies and generates revenue from special equipment, self-developed chemical products and supporting service, transfer. Revenue is recognized when contract obligations have been performed. For such sales arrangements, the Company recognizes revenue when products are delivered, on-site assistance services rendered, and acceptance reports are signed off by customers. Such method is adopted because the Company believes it best depicts the transfer of services to the customer.

The Company provides oily sludge disposal and treatment services to oilfield companies and generates revenue from treatment services of oily sludge. Revenue is recognized when contract obligations have been performed. For such sales arrangements, the Company recognizes revenue using output method, based on the percentage-of-completion method. Such method is adopted because the Company believes it best depicts the transfer of services to the customer.

Platform Outsourcing Services

The Company provides online platform development and maintenance services to gas stations in various provinces in China. The Company believes that customers receive and consume the economic benefits simultaneously as the Company fulfils its performance obligations and that the operation and maintenance services are continuous in nature, with customers receiving ongoing benefits throughout the service period. The Company invoices customers at the end of each month based on fixed service fees and classifies this portion of revenue as revenue recognized over time.

The Company also provides API (application programming interface) port export services and related maintenance services to business partners in various industries that may have transactions in the fueling scenario. As the Company does not create or enhance assets controlled by its customers during the provision of its services and its customers do not simultaneously receive and consume services, the Company recognizes revenue at a single point in time when the online transaction is completed. The Company’s services enable terminal users of various mobile applications operated by its customers or partners to complete refueling transactions in cash or online through various payment channels; when each transaction, including refueling and payment, is completed, the Company is entitled to charge, at pre-set rates, each transaction amount as a service fee and recognize the underlying amount as revenue. Related fees are generally billed monthly on a per-transaction basis.

Arrangements with Multiple Performance Obligations

Contracts with customers may include multiple performance obligations. For such arrangements, the Company will allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or using expected cost-plus margin.

Contract Balances

The Company’s contract balances include contract costs, net and contract liabilities from contracts with customers, and the following table provides information about contract balances:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
	RMB		(Unaudited)		(Unaudited)
Contract costs, net	¥	48,335,817	¥	41,628,922	$	5,703,139
Contract liabilities	¥	1,820,481	¥	4,098,136	$	561,442

Contract Costs, Net - The Company recognizes an asset from the costs incurred to fulfill a contract when those costs meet all of the following criteria: (i) the costs relate directly to a contract or to an anticipated contract that the Company can specifically identify; (ii) the costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and (iii) the costs are expected to be recovered.

F-14

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Pre-Contract Costs - Pre-contract costs are the amounts prepaid to suppliers for purchases of customized equipment in anticipation of obtaining planned contracts for the Company’s hardware and software revenue. If it subsequently confirms that the Company is unable to secure the planned contracts with a customer after making the advance payments for these planned contracts, the Company evaluates the probable recoverability of the pre-contract cost and charges to expenses when the Company determines that the recovery of such pre-contract cost is improbable.

Executed Contract Costs - Direct costs, such as material, labor, depreciation and amortization and subcontracting costs and indirect costs allocable to contracts include the costs of contract supervision, tools and equipment, supplies, quality control and inspection, insurance, repairs and maintenance for quality assurance purposes before clients’ initial acceptance. Once products are delivered, installed and debugged for intended use and accepted by a client, which may last from weeks to months (this process is decided by the client’s individual project construction arrangement), the Company records revenue based on the contract or the final clients’ acceptance. Minor costs for repair during the maintenance period after initial acceptance are recorded as cost of goods sold as they are incurred. All other general and administrative costs and selling costs are charged to expenses as incurred. The Company generally ships its products approximately one week to six months after production begins and the timing depends on the size of the overall project.

Contract Liabilities - Contract liabilities are recognized for contracts where payment has been received in advance of performance under the contract. The Company’s contract liabilities consist primarily of the Company’s unsatisfied performance obligations as of the balance sheet dates. Contract liabilities are recognized as revenue after control of the products or services is transferred to the customer and all revenue recognition criteria have been met. The amount of revenue recognized during the six months ended December 31, 2023 and 2024 that was previously included within contract liability balances was ¥1,689,759 ($231,496), and ¥263,824 ($36,144), respectively.

Performance Obligations - Performance obligations include delivery of products and provision of services. The Company recognizes revenue when performance obligations under the terms of a contract with its customer are satisfied. This occurs when the control of the goods and services have been transferred to the customer. Accordingly, revenue for sale of goods is generally recognized upon shipment or delivery depending on the shipping terms of the underlying contract, and revenue for provision of services is recognized upon the service rendered. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods and providing services.

Amounts billed to customers for shipping and handling activities to fulfill the Company’s promise to transfer the goods are included in revenue, and costs incurred by the Company for the delivery of goods are classified as cost of sales in the consolidated statements of operations and comprehensive income (loss). Sales, value added, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. The Company generally offers assurance-type warranties for its products. The specific terms and conditions of those warranties vary depending upon the product. The Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time product revenue is recognized. Factors that affect the warranty liability include historical product-failure experience and estimated repair costs for identified matters. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. The amount accrued for expected returns and warranty claims was immaterial as of December 31, 2024.

Practical Expedients Elected

Incremental Costs of Obtaining a Contract - The Company has elected the practical expedient permitted in ASC 340-40-25-4, which permits an entity to recognize incremental costs to obtain a contract as an expense when incurred if the amortization period will be less than one year and not significant.

Significant Financing Component - The Company has elected the practical expedient permitted in ASC 606-10-32-18, which allows an entity to not adjust the promised amount of consideration for the effects of a significant financing component if a contract has a duration of one year or less. As the Company’s contracts are majorly less than one year in length, consideration will not be adjusted. For the Company’s contracts include a standard payment term of 90 days to 180 days; consequently, there is no significant financing component within contracts. There are also some new contracts that will not be completed within one year from year 2024, the Company did calculation and the amount was not material as end of December 31, 2024.

Share-Based Compensation - Share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight–line basis over the requisite service period for the entire award. The Company has elected to recognize compensation expenses using the valuation model estimated at the grant date based on the award’s fair value.

F-15

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Research and Development Expenses - Research and development costs comprise the costs of developing and improving new and existing products and services, including employee compensation, materials, depreciation of equipment and contracted technical services. All R&D costs are expensed as incurred unless specific development projects (e.g. qualifying software systems or equipment prototypes) demonstrate technological feasibility and probable future economic benefits. Field testing costs for pre-commercial products are classified as R&D until technological validation is achieved. As of December 31, 2024, we have had no capitalization.

Leases - The Company follows FASB ASC No. 842, Leases (“Topic 842”). The Company leases office spaces and land use rights, which are classified as operating leases in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases (with the exception of short-term leases, usually with initial term of 12 months or less) on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The ROU asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All ROU assets are reviewed for impairment annually. There was no impairment for ROU lease assets as of June 30, 2024 and December 31, 2024.

Income Taxes - Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes. Deferred taxes are provided on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, and tax carry forwards. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. The Company has not been subject to any income taxes in the United States or the Cayman Islands.

The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. The Company has no uncertain tax position as of December 31, 2024 and June 30, 2024.

In general, the PRC tax authority has up to five years to conduct examinations of the Company’s tax filings. Accordingly, the PRC subsidiaries’ and VIE and subsidiaries of the VIE’s tax years ended December 31, 2020 through December 31, 2024 for the Company’s People’s Republic of China (“PRC”) subsidiaries remain open for statutory examination by PRC tax authorities.

Comprehensive Income (Loss) - Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). The foreign currency translation gain or loss resulting from the translation of the financial statements expressed in US$ to RMB is reported in other comprehensive income (loss) in the consolidated statements of operations and comprehensive income (loss).

Earnings (Loss) per Share - Earnings (loss) per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of Ordinary Shares outstanding. Diluted EPS are computed by dividing net income (loss) by the weighted-average number of Ordinary Shares and dilutive potential Ordinary Share equivalents outstanding. Potentially dilutive Ordinary Shares consist of Ordinary Shares issuable upon the conversion of ordinary share options, restricted shares and warrants (using the treasury share method).

F-16

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Given the fact that the “2024 Reverse Split” only affected the outstanding number of the Company’s Class A Ordinary Shares, the weighted average number of Class A Ordinary Shares outstanding had been retroactively restated for the 1-for-18 reverse shares split. While the Class B Ordinary Shares’ number and voting power were not subjected to the 2024 Reverse Split, according to the Company’s Fourth Amended and Restated M&A and Articles of Association, “each Class B Ordinary Share entitles its holder the right to convert it into one eighteenth (1/18) of a Class A Ordinary Share at any time. Correspondingly, each one eighteenth (1/18) of a share of Class B Ordinary Share has dividend rights equivalent to the one share of Class A Ordinary Share”. In addition, (a) since becoming public, the Company has never declared a dividend, and (b) if a dividend were declared, the Board of Directors would intend to make sure the dividends were properly allocated among the Class A Ordinary Shares and Class B Ordinary Shares to give effect to the 1/18 ratio. The Company believes that all of these treatments are designed to ensure that the dividend rights and the dividend rate are the same with that for Class A and Class B Ordinary Shares. To calculate EPS equally for all ordinary shares, the Company use the sum of the weighted average number of Class A Ordinary Shares outstanding and one-eighteenth of the weighted average number of Class B Ordinary Shares outstanding as the denominator.

The following table sets forth the computation of basic and diluted earnings per share for the six months ended December 31, 2023 and 2024:


	For the six months ended December 31,
	2023		2024		2024
	RMB		RMB		US Dollars
	(Unaudited)		(Unaudited)		(Unaudited)
Numerator:
Net loss attributable to Recon Technology, Ltd	¥	(22,554,022)	¥	(20,588,329)	$	(2,820,588)

Denominator:
Weighted-average number of ordinary shares outstanding – basic*		2,728,056		8,978,328		8,978,328
Class A Ordinary Shares*		2,333,612		7,987,959		7,987,959
Class B Ordinary Shares (used for EPS calculation) **		394,444		990,369		990,369
Potentially dilutive shares from outstanding options/warrants		—		—		—
Weighted-average number of ordinary shares outstanding – diluted*		2,728,056		8,978,328		8,978,328

Earnings (loss) per share – basic and diluted *	¥	(8.27)	¥	(2.29)	$	(0.31)

*	Retrospectively restated for the 1-for-18 reverse share split on May 1, 2024.

The Class B Ordinary Shares were not subjected to reverse shares split, and each Class B Ordinary Share is convertible into one-eighteenth (1/18) of one Class A Ordinary Share at any time by the holder thereof, so the weighted average number of Class B Ordinary Shares is calculated on a one-for-eighteen basis of issued and outstanding Class B Ordinary Shares.

Warrants - The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own Class A Ordinary Shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the consolidated statements of operations.

F-17

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Recently Issued Accounting Pronouncements

In March 18, the FASB issued Accounting Standards Update 2025-02—Liabilities (405), which is also known as Staff Accounting Bulletin (SAB) No. 122 to rescind SAB 121. SAB 121 previously required an entity to recognize a liability and corresponding asset for its obligation to safeguard crypto assets. Full retrospective application of SAB 122 is required for annual periods beginning after December 15, 2024, but entities are permitted to early adopt SAB 122 in any interim or annual financial statement period included in filings with the SEC on or after January 30, 2025. The Company believes there is no effect on the Company’s consolidated financial statements and disclosures and will not adopt this new guidance.

On January 6, 2025, the FASB issued ASU 2025-01, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. The amendment in this Update amends the effective date of Update 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of Update 2024-03 is permitted. The company evaluated and believe there is no effect on the on the Company’s consolidated financial statements and disclosure.

On November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expenses Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”. The standard is intended to enhance transparency of income statement disclosures primarily through additional disaggregation of relevant expense captions. The standard is effective for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with prospective or retrospective application permitted. The Company is currently evaluating the potential impact of adopting this standard on the Company’s consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. This ASU requires additional quantitative and qualitative income tax disclosures to enable financial statements users better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. This ASU is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2023-09 will have on its condensed consolidated financial statement presentation or disclosures.

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.

NOTE 3. ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consisted of the following:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
Third Parties	RMB		(Unaudited)		(Unaudited)
Trade accounts receivable	¥	39,825,619	¥	41,967,275	$	5,749,493
Allowance for credit losses		(1,193,857)		(1,601,201)		(219,364)
Total third parties, net	¥	38,631,762	¥	40,366,074	$	5,530,129


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
Third Parties- long-term	RMB		(Unaudited)		(Unaudited)
Trade accounts receivable	¥	774,604	¥	1,981,767	$	271,501
Allowance for credit losses		(774,604)		(1,981,767)		(271,501)
Total third-parties, net	¥	—	¥	—	$	—

Provision for credit losses of accounts receivable due from third parties was ¥1,051,564 for the six months ended December 31, 2023. Provision for credit losses of accounts receivable due from third parties was ¥1,614,507 ($221,187) for the six months ended December 31, 2024.

F-18

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As the date of this report, approximately 23.8%, or ¥9.6 million ($1.3 million) of net outstanding balance as of December 31, 2024 has been collected.

Movement of allowance for doubtful accounts is as follows:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
	RMB		(Unaudited)		(Unaudited)
Beginning balance	¥	995,449	¥	1,968,461	$	269,678
Charge to (reversal of) credit losses		973,012		1,614,507		221,187
Foreign currency translation adjustments		—		—		—
Ending balance	¥	1,968,461	¥	3,582,968	$	490,865

NOTE 4. NOTES RECEIVABLE

Notes receivable represented the non-interest-bearing commercial bills the Company received from the customers for the purpose of collection of sales amounts, which ranged from three to six months from the date of issuance. As of June 30, 2024 and December 31, 2024, notes receivable was ¥1,341,820 and ¥3,206,733 ($439,321), respectively. As of June 30, 2024 and December 31, 2024, no notes were guaranteed or collateralized. As the date of this report, 64.0%, or ¥2.1 million ($0.3 million) have been subsequently collected.

NOTE 5. OTHER RECEIVABLES, NET

Other receivables, net consisted of the following:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
Third Party	RMB		(Unaudited)		(Unaudited)
Business advances to officers and staffs *	¥	1,373,300	¥	1,469,788	$	201,360
Deposits for projects		1,056,316		1,651,530		226,259
VAT recoverable		583,413		625,505		85,694
Others		1,139,397		763,660		104,620
Allowance for credit losses		(800,374)		(575,618)		(78,859)
Other receivable, net	¥	3,352,052	¥	3,934,865	$	539,074

*Business advances to officers and staffs represent advances for business travel and sundry expenses related to oilfield or on-site installation and inspection of products through customer approval and acceptance.

Net recovery of provision for credit losses of other receivables was ¥1,392,516 for the six months ended December 31, 2023. Net recovery of provision for credit losses of other receivables was ¥224,756 ($30,792) for the six months ended December 31, 2024.

Movement of allowance for credit losses is as follows:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
	RMB		(Unaudited)		(Unaudited)
Beginning balance	¥	1,994,960	¥	800,374	$	109,651
Charge to (reversal of) allowance		(1,194,586)		(224,756)		(30,792)
Ending balance	¥	800,374	¥	575,618	$	78,859

F-19

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 6. LOANS TO THIRD PARTIES

Loans to third parties consisted of the following:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
	RMB		(Unaudited)		(Unaudited)
Working fund to third party companies	¥	208,928,370	¥	250,452,064	$	34,311,792
Less: Long term portion		—		(18,500,000)		(2,534,490)
Loans to third parties	¥	208,928,370	¥	231,952,064	$	31,777,302

Loans to third parties are mainly used for short-term funding to support the Company’s external business partners and at the same time the Company can earn interest income from these loans. Most of these loans bear interest and have terms of no more than one year, except one of the loans to third party has term of three years. The Company periodically reviewed the loans to third parties as to whether their carrying values remain realizable. The Company believes that the risk associated with the above loans are relatively low based on the evaluation of the creditworthiness of these third-party debtors and the relationships with them. As the date of this report, approximately 39.9%, or ¥99.8 million ($13.7 million) was collected by the Company and the remaining part was expected to be paid in full by end of December 2025.

NOTE 7. CONTRACT COSTS, NET

Contract costs, net consisted of the following:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
Third Party	RMB		(Unaudited)		(Unaudited)
Contract costs	¥	56,730,105	¥	48,672,331	$	6,668,083
Allowance for credit losses		(8,394,288)		(7,043,409)		(964,944)
Total contract costs, net	¥	48,335,817	¥	41,628,922	$	5,703,139

As of December 31, 2024, total contracts costs, net amounted to ¥41.6 million ($5.7 million), of which 40.7%, or ¥16.9 million ($2.3 million) have been subsequently realized as the date of this report, and the remaining balance is expected to be utilized by December 2025.

Provision for credit losses of contract costs was ¥1,939,135 for the six months ended December 31, 2023. The net recovery of credit losses of contract costs was ¥521,268 ($71,413) for the six months ended December 31, 2024.

Movement of allowance for credit losses of contract costs is as follows:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
	RMB		(Unaudited)		(Unaudited)
Beginning balance	¥	2,586,155	¥	8,394,288	$	1,150,013
Reversal of allowance		4,532,872		(521,268)		(71,413)
Charge to cost of sales		1,275,261		(829,611)		(113,656)
Ending balance	¥	8,394,288	¥	7,043,409	$	964,944

F-20

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 8. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
	RMB		(Unaudited)		(Unaudited)
Motor vehicles	¥	3,699,101	¥	3,607,582	$	494,237
Office equipment and fixtures		1,405,076		1,432,377		196,235
Production equipment		31,231,574		31,530,627		4,319,678
Leasehold improvement		2,260,000		2,260,000		309,618
Total cost		38,595,751		38,830,586		5,319,768
Less: accumulated depreciation		(15,515,349)		(17,028,247)		(2,332,860)
Less: accumulated impairment		(942,462)		(942,462)		(129,117)
Property and equipment, net	¥	22,137,940	¥	20,859,877	$	2,857,791
Construction in progress	¥	219,132	¥	1,144,095	$	156,740

Depreciation expenses was ¥1,426,971 and ¥1,724,066 ($236,196) for the six months ended December 31, 2023 and 2024, respectively.

Income from property and equipment disposal was ¥32,252 and ¥9,608 ($1,316) for the six months ended December 31,2023 and 2024, respectively.

NOTE 9. BUSINESS ACQUISITION AND INVESTMENT IN UNCONSOLIDATED ENTITY

(U)Step Acquisition of Future Gas Station (Beijing) Technology, Ltd (“FGS”)

On August 21, 2018, the Company entered into a definitive investment agreement and a supplemental agreement (collectively, the “Agreement”) with FGS and the other shareholders of FGS. Following full performance under the Agreement, Recon will own 43% of FGS. As consideration for increasing its affiliates’ interest in FGS from 8% to 43%, the Company will (1) pay a total of RMB10 million in cash to FGS and (2) issue 487,057 (27,059 shares post 2024 Reverse Split) restricted Class A Ordinary Shares of the Company (the “Restricted Shares”) to the other shareholders of FGS within 30 days after FGS finalizes recording the Company’s corresponding interest at the local governmental agency. If FGS does not reach certain performance goals, the Company has the right to cancel all of the Restricted Shares and without further payment. The Restricted Shares are also subject to lock-up period requirements that vary for each of FGS shareholders, from one year to three years following issuance of the Restricted Shares. FGS has finalized recording Recon’s corresponding interest at the local governmental agency, and Recon has issued 487,057 (27,059 shares post 2024 Reverse Split) Restricted Shares in total to the other shareholders of FGS in August 2018.

On September 24, 2019, the Company signed an extension agreement with FGS and the other shareholders of FGS to postpone the Agreement to provide extra period for FGS to further fulfill the goals mentioned on the supplemental agreement. During the original contract period, FGS adjusted its operation model with an advanced improvement of its mobile applications and business model. Objected user and average Gross Merchandise Volume (“GMV”) of FGS’ mobile applications have been exceeded. FGS will need an extension to deploy its business in more provinces to complete a goal of 200 more gas stations.

On March 17, 2020, the Company signed a new supplemental agreement with FGS and the other shareholders of FGS to extend another 12 months to February 2021 for FGS and its shareholders to fulfill the goals mentioned on the supplemental agreement.

As of December 31, 2020, the Company owned 43% of the equity interests of FGS. The investments are accounted for using the equity method because the Company has significant influence, but no control of FGS.

F-21

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

On February 8, 2021, and pursuant to FGS’ shareholder meeting resolution dated January 13, 2021 (“Acquisition Date”), two of the Company’s subsidiaries entered into the fourth supplemental agreement to the investment agreement with FGS and FGS’ founding shareholders to acquire 8% equity ownership of FGS, as an exchange for waiver of the requirement on FGS’ performance goal about the number of gas stations and cancellation of the related lock-up terms on the 487,057 (27,059 shares post 2024 Reverse Split) Restricted Shares of the Company (reflecting the effect of one-for-five reverse share split) issued per the agreement signed on August 21, 2018. FGS failed to complete one of the three goals set up in the investment agreement. As a consequence, the Company shall cancel one third of the 487,057 (27,059 shares post 2024 Reverse Split) Restricted Shares, which shall be 162,352 (9,020 shares post 2024 Reverse Split) Restricted Shares. According to this new arrangement, the Company waived the goals and cancellation of the shares as a deemed consideration of the 8% equity. Based on the share price $1.61 ($28.98 post 2024 Reverse Split) on January 13, 2021, the fair value of the waived performance goal equals to ¥1,689,807 ($231,503). As a result, the Company owns 51% interest of FGS and this transaction was considered as a step acquisition under ASC 805 “Business Combinations”. A step acquisition gain of ¥979,254 ($134,157) arising from revaluation of previously held equity interest was recognized during the year ended June 30, 2021.

The Company retained independent appraisers to advise management in the determination of the fair value of customers relationship and goodwill. The values assigned in these financial statements represent management’s best estimate of fair values as of the Acquisition Date. The carrying value of other assets and liabilities other than customer relationship and goodwill, are approximate at their fair value as of the Acquisition Date.

The fair values of the identifiable assets and liabilities as at the date of the acquisitions are summarized in the following table:


	RMB		US Dollars
Cash	¥	471,843	$	64,642
Accounts receivable, net		831,049		113,853
Other receivables, net		144,285		19,767
Contract costs, net		75,250		10,309
Prepaid expenses		91,132		12,485
Property and equipment, net		118,130		16,184
Intercompany receivables*		6,850,000		938,446
Intangible assets- customer relationship		7,000,000		958,996
Goodwill		6,996,895		958,571
Accounts payable		(1,032,078)		(141,394)
Other payables		(1,273,182)		(174,425)
Other payable- related parties		(479,959)		(65,754)
Deferred revenue		(39,786)		(5,451)
Accrued payroll and employees’ welfare		(1,629,519)		(223,243)
Taxes payable		(64,253)		(8,803)
Deferred tax liability		(1,050,000)		(143,849)
Total	¥	17,009,807	$	2,330,334
Cash considerations		—		—
Deemed equity consideration to acquire 8% equity interest in FGS		1,689,807		231,503
Fair value of previously held equity interest		30,530,000		4,182,593
Non-controlling interest		34,790,000		4,766,210
Capital contribution receivable due from non-controlling Interest		(50,000,000)		(6,849,972)
Total	¥	17,009,807	$	2,330,334

*Intercompany receivables from Nanjing Recon and BHD are eliminated upon consolidation.

The noncontrolling interest has been recognized at fair value net with subscription receivable on the acquisition date.

F-22

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Goodwill and intangible assets

The excess of purchase price over the fair value of assets acquired and liabilities assumed of the business acquired was recorded as goodwill. The goodwill is not expected to be deductible for tax purposes. In conjunction with the preparation of our consolidated financial statement for the six months ended December 31, 2023 and 2024, the management performed evaluation on the impairment of goodwill and concluded that there was no impairment for goodwill for the six months ended December 31, 2023 and 2024. As of December 31, 2024, goodwill was fully impaired.

The identifiable goodwill acquired and the carrying value as of December 31, 2024 is as follows:


	Fair Value
	RMB		US Dollars
	(Unaudited)		(Unaudited)
Goodwill	¥	6,996,895	$	958,571
Less: impairment		(6,996,895)		(958,571)
The carrying value of goodwill as of December 31, 2024	¥	—	$	—

The fair value of identified intangible assets, which is customer relationship, and its estimated useful lives as of December 31, 2024 is as follows:


					Average
					Useful Life
	Fair Value				(in Years)
	RMB		US Dollars
	(Unaudited)		(Unaudited)
Intangible assets - customer relationship	¥	7,000,000	$	958,996	10
Less: accumulated amortization		(1,750,000)		(239,749)
Less: impairment		(5,250,000)		(719,247)
Intangible assets - customer relationship, net	¥	—	$	—

The amortization expense of customer relationship was all nil for the six months ended December 31, 2023 and 2024, respectively.

Impairment loss for intangible assets - customer relationship was all nil for the six months ended December 31, 2023 and 2024, respectively. As intangible assets - customer relationship was not able to generate enough future cashflow. Therefore, the Company decided to record full impairment of the intangible assets - customer relationship during the year ended June 30, 2023.

NOTE 10. LEASES

The Company leases office spaces and land use rights under non-cancelable operating leases, with terms ranging from one to fifty years. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right of use assets and lease liabilities. Lease expense for lease payment is recognized on a straight-line basis over the lease term. Leases with initial term of 12 months or less are not recorded on the balance sheet.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

F-23

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

The table below presents the operating lease related assets and liabilities recorded on the balance sheets:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
	RMB		(Unaudited)		(Unaudited)
Rights of use lease assets	¥	23,547,193	¥	22,014,961	$	3,016,037
Less: impairment		—		—		—
Rights of use lease assets, net	¥	23,547,193	¥	22,014,961	$	3,016,037

Operating lease liabilities – current	¥	3,741,247	¥	3,891,976	$	533,198
Operating lease liabilities – non-current		3,971,285		2,781,196		381,022
Total operating lease liabilities	¥	7,712,532	¥	6,673,172	$	914,220

The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of December 31, 2024:


	June 30,		December 31,
	2024		2024
			RMB
	RMB		(Unaudited)
Remaining lease term and discount rate:
Weighted average remaining lease term (years)	34.08		35.41
Weighted average discount rate	5.0	%	3.0	%

Operating lease costs and short-term lease costs for the six months ended December 31, 2023 were ¥1,659,302 and ¥313,533, respectively.

Operating lease costs and short-term lease costs for the six months ended December 31, 2024 were ¥2,931,265 ($401,582) and ¥316,233 ($43,324), respectively.

Impairment loss for the ROU was all nil for the six months ended December 31,2023 and 2024, respectively.

The following is a schedule, by years, of maturities of lease liabilities as of December 31, 2024:


	RMB		US Dollars
Twelve months ending December 31,	(Unaudited)		(Unaudited)
2025	¥	4,016,688	$	550,283
2026		2,291,689		313,960
2027		542,922		74,380
Total lease payments		6,851,299		938,623
Less: imputed interest		(178,127)		(24,403)
Present value of lease liabilities		6,673,172		914,220
Less: operating lease liabilities – current		3,891,976		533,198
Operating lease liabilities – non-current	¥	2,781,196	$	381,022

F-24

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 11. OTHER PAYABLES

Other payables consisted of the following:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
Third Parties	RMB		(Unaudited)		(Unaudited)
Professional service fees	¥	1,610,455	¥	416,814	$	57,103
Distributors and employees		586,929		599,992		82,199
Accrued expenses		229,385		213,718		29,279
Others		342,916		328,847		45,052
Total	¥	2,769,685	¥	1,559,371	$	213,633


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
Related Parties	RMB		(Unaudited)		(Unaudited)
Expenses paid by the major shareholders	¥	1,453,910	¥	1,240,156	$	169,901
Due to family members of the owners of BHD and FGS		845,159		547,159		74,960
Total	¥	2,299,069	¥	1,787,315	$	244,861

NOTE 12. TAXES PAYABLE

Taxes payable consisted of the following:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
	RMB		(Unaudited)		(Unaudited)
VAT payable	¥	439,771	¥	1,056,214	$	144,701
Income tax payable		440,060		440,030		60,284
Other taxes payable		113,534		189,252		25,927
Total taxes payable	¥	993,365	¥	1,685,496	$	230,912

NOTE 13. BANK LOANS

Short-term bank loans consisted of the following:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
	RMB		(Unaudited)		(Unaudited)
Bank of Kunlun (1)	¥	843,487	¥	—	$	—
Industry and Commercial Bank of China (“ICBC”) (2)		10,000,000		10,000,000		1,369,994
China Construction Bank (3)		1,106,091		1,106,212		151,550
Industry and Commercial Bank of China (“ICBC”) (4)		476,381		476,424		65,271
Total short-term bank loans	¥	12,425,959	¥	11,582,636	$	1,586,815

(1)

On August 31, 2022, the Company entered into a loan agreement with Bank of Kunlun to borrow up to ¥2,900,000 ($397,298) as working capital for eighteen months, with a maturity date of February 29, 2024. The loan has a fixed interest rate of 6.0% per annum. The Company made a withdrawal in an amount of ¥1,000,000 ($136,999) on August 31, 2022. The loan is guaranteed by the non-controlling shareholder of Gan Su BHD. The Company also pledged the accounts receivable from the contracts the Company entered into with CNPC as collateral for this loan, and the total value of the contracts are approximately ¥6.5 million (approximately $1.0 million). As of December 31, 2024, the bank loan has been repaid.

F-25

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(2)

On June 25, 2024, the Company entered into a revolving loan facility with ICBC to borrow up to ¥10,000,000 ($1,369,994) as working capital for one year, with a maturity date of June 24, 2025. The loan has a fixed interest rate of 2.8% per annum. The Company made a withdrawal in an amount of ¥10,000,000 ($1,369,994)) on June 25, 2024. This loan is pledged by the self-owned housing property of one of the founders of the Company with carrying value of approximately ¥17.0 million ($2.3 million) as collateral for this loan.

(3)

On June 11, 2024, the Company entered into a revolving loan facility with China Construction Bank to borrow up to ¥1,105,000 ($151,384) as working capital for twelve months, with a maturity date of June 11, 2025. The loan has a fixed interest rate of 3.95% per annum. The non-controlling shareholders of FGS are co-borrowers.

(4)	On June 18, 2024, the Company entered into a revolving loan facility with ICBC to borrow up to ¥476,000 ($65,211) as working capital for twelve months, with a maturity date of June 18, 2025. The loan has a fixed interest rate of 3.2% per annum.

Interest expense for the short-term bank loan was ¥159,276 and ¥169,930 ($23,280) for the six months ended December 31,2023 and 2024, respectively.

NOTE 14. SHORT-TERM BORROWINGS DUE TO RELATED PARTIES

Short-term borrowings due to related parties consisted of the following:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
Short-term borrowings due to related parties:	RMB		(Unaudited)		(Unaudited)
Short-term borrowing from a Founder, 3.45% annual interest, due on December 28, 2024	¥	10,002,875	¥	—	$	—
Short-term borrowing from a Founder, 3.45% annual interest, due on December 13, 2025		—		10,018,208		1,372,489
Total short-term borrowings due to related parties	¥	10,002,875	¥	10,018,208	$	1,372,489

No short-term borrowings due to related parties were guaranteed or collateralized as of June 30, 2024 and December 31, 2024.

Interest expense for short-term borrowings due to related parties were ¥338,338 and ¥176,333 ($24,158) for the six months ended December 31, 2023 and 2024, respectively.

NOTE 15. LONG-TERM BORROWINGS DUE TO RELATED PARTIES

Long-term borrowings due to related parties consisted of the following:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
Long-term borrowings due to related parties:	RMB		(Unaudited)		(Unaudited)
Long-term borrowing from a Founder, 3.75% annual interest, three years loan, due in April 29, 2027	¥	10,000,000	¥	10,000,000	$	1,369,994
Total long-term borrowings due to related parties	¥	10,000,000	¥	10,000,000	$	1,369,994

On May 29, 2024, the Company entered into a three-year supplemental agreement with the founder, changing loan maturity date from June 4, 2024, and June 16, 2024, to April 29, 2027 and the annual interest rate to 3.75%.

Interest expense for short-term borrowings due to related parties was nil and ¥191,667($26,258) for the six months ended December 31, 2023 and 2024, respectively.

F-26

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 16. CLASS A ORDINARY SHARES

Share offering

On March 15, 2023, the Company and certain institutional investors (the “Purchasers”) entered into that certain securities purchase agreement (the “Purchase Agreement”), pursuant to which the Company agreed to sell to such Purchasers an aggregate of 8,827,500 (490,417 shares post 2024 Reverse Split) Class A Ordinary Shares, par value $0.0925 (US$1.67 post 2024 Reverse Split) per share and 1,175,000 (65,278 pre-funded warrants post 2024 Reverse Split) pre-funded warrants (the “Pre-Funded Warrants”) to purchase Class A Ordinary Shares in a registered direct offering, and warrants to purchase up to 10,002,500 (555,694 shares post 2024 Reverse Split) Class A Ordinary Shares in a concurrent private placement, for gross proceeds of approximately $8.0 million before deducting the placement agent’s fees and other estimated offering expenses.

On October 16, 2023, 1,175,000 (65,278 pre-funded warrants post 2024 Reverse Split) pre-funded warrants issued on March 15, 2023 were exercised by investor and 1,175,000 (65,278 shares post 2024 Reverse Split) Class A Ordinary Shares were issued and being outstanding.

On March 29, 2024, the Company’s shareholders approved the reverse shares split of the Company’s Class A Ordinary Shares at the ratio of one-for-eighteen with the market effective date of May 1, 2024 (the “2024 Reverse Split”). In connection with the reverse shares split, on March 29, 2024 the Company’s shareholder approved and authorized the Company’s registered office service agent to filed the Fourth Amended and Restated Memorandum and Articles of Association with local registry, and change its authorized share capital from: US$15,725,000 divided into 150,000,000 Class A Ordinary Shares of a nominal or par value of US$0.0925 each, and 20,000,000 Class B Ordinary Shares of a nominal or par value of US$0.0925 each, to: US$58,000 divided into 500,000,000 Class A Ordinary Shares of a nominal or par value of US$0.0001 each and 80,000,000 Class B Ordinary Shares of a nominal or par value of US$0.0001 each (the “2024 change in capital structure”). As a result of the 2024 Reverse Split, each eighteen pre-split Class A Ordinary Shares outstanding were automatically combined and converted to one issued and outstanding Class A Ordinary Share. No fractional Class A Ordinary Shares were issued to any shareholders in connection with the 2024 Reverse Split. Each shareholder was entitled to receive one Class A Ordinary Shares in lieu of the fractional share that would have resulted from the reverse shares split. The Depository Trust Company (the “DTC”) requested the Company’s transfer agent to issue 54,727 round-up Class A Ordinary Shares. As of May 1, 2024 (immediately prior to the effective date), there were 141,703,218 Class A Ordinary Shares outstanding, and the number of Class A Ordinary Shares outstanding after the 2024 Reverse Split is 7,927,132, taking into account of the effect of rounding fractional shares into whole shares. In addition, all Class A Ordinary Shares, options and any other Class A securities of the Company outstanding immediately prior to the 2024 Reverse Split was retroactively applied by dividing the number of ordinary shares into which the options and other securities are exercisable by 18 and multiplying the exercise price thereof by 18, as a result of the 2024 Reverse Split. All share and earnings per-share information have been retroactively adjusted to reflect the 2024 Reverse-Split. The Company had 500,000,000 authorized Class A Ordinary Shares, par value of $0.0001, of which 7,987,959 and 7,987,959 Class A Ordinary Shares were issued and outstanding as of June 30, 2024 and December 31, 2024, respectively. The Company had 80,000,000 authorized Class B Ordinary Shares, par value of $0.0001, of which 7,100,000 and 20,000,000 Class B Ordinary Shares were issued and outstanding as of June 30, 2024 and December 31, 2024, respectively.

F-27

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

The following table summarizes the Company’s Pre-Funded Warrants activities and status of Pre-Funded Warrants as of December 31, 2024:


		Weighted		Average
		Average		Remaining
	Pre-Funded	Exercise Price		Period
Pre-Funded Warrants	Warrants*	Per Share*		(Years)
Outstanding as of June 30, 2023	65,278	$	0.18	5.22
Issued	—		—	—
Forfeited	—		—	—
Exercised	(65,278)		0.18	—
Expired	—		—	—
Outstanding as of June 30, 2024	—	$	—	—
Issued	—		—	—
Forfeited	—		—	—
Exercised	—		—	—
Expired	—		—	—
Outstanding as of December 31, 2024	—	$	—	—

* Retrospectively restated for the 1-for-18 reverse share split on May 1, 2024.

Appropriated Retained Earnings

According to the Memorandum and Articles of Association, the Company is required to transfer a certain portion of its net profit, as determined under PRC accounting regulations, from current net income to the statutory reserve fund. In accordance with the PRC Company Law, companies are required to transfer 10% of their profit after tax, as determined in accordance with PRC accounting standards and regulations, to the statutory reserves until such reserves reach 50% of the registered capital of the companies. As of June 30, 2024 and December 31, 2024, the balance of total statutory reserves was ¥4,148,929 and ¥4,148,929 ($568,401), respectively.

NOTE 17. ORDINARY SHARES PURCHASE WARRANTS ISSUED TO INVESTORS

In June 2021, the Company issued to some institutional investors warrants to purchase an aggregate of up to 8,814,102 (489,673 shares post 2024 Reverse Split) Class A Ordinary Shares. (the “Warrant 2021”) The warrants are subject to deemed-liquidation redemption features and are therefore classified as a liability in accordance with FASB ASC 480. Warrant liability is classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities. The warrant liability is re-valued at each reporting period with the change in fair value recorded through earnings. The Company established the initial fair value of the warrants at $34,860,000. During the year ended June 30, 2023, the exercise price of warrants to purchase an aggregate of up to 7,950,769 (441,710 shares post 2024 Reverse Split) Class A Ordinary Shares was adjusted to $0.80 ($14.40 post 2024 Reverse Split), and the exercise price of the remaining warrants to purchase an aggregate of up to 863,333 (47,963 shares post 2024 Reverse Split) Class A Ordinary Shares remained at $6.24 ($112.32 post 2024 Reverse Split).

On December 14, 2023, the Company entered into a Warrant Purchase Agreement with certain accredited investors pursuant to which the Company agreed to buy back an aggregate of 7,950,769 (441,710 warrants post 2024 Reverse Split) warrants from the investors, and the investors agreed to sell the Warrants back to the Company. The purchase price for each Warrant was $0.25 ($4.50 post 2024 Reverse Split). As of December 31, 2024, The Company still holds the investor 863,333 (47,963 warrants post 2024 Reverse Split) warrants. As of June 30, 2024 and December 31, 2024, the fair value of the warrant liability of the Warrant 2021 was $959 and $2,398 (¥17,504). During the six months ended December 31, 2023 and 2024, there was change in fair value of warrant liability in an aggregate amount of $197,692 and $1,415, respectively.

F-28

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

The key inputs into the Black-Scholes model were as follows at their measurement dates:


	December 31,			June 30,
Input	2024			2024
Number of warrants	$	47,963		$	47,963
Share price	$	2.09		$	0.02
Risk-free interest rate		4.25	%		4.62	%
Volatility		115	%		105	%
Exercise price	$	112.32		$	112.32
Warrant life		1.96 years			2.46 years

The following table presents information about the Company’s warrants that were measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2024, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

Quoted Prices In

Significant Other

June 30,

Active Markets

Observable Inputs

Unobservable Inputs

Description

2024

(Level 1)

(Level 2)

(Level 3)

Liabilities:

Warrant liability - non-current

959

—

959

Quoted Prices In

Significant Other

December 31,

Active Markets

Observable Inputs

Unobservable Inputs

Description

2024

(Level 1)

(Level 2)

(Level 3)

Liabilities:

Warrant liability - non-current

2,398

—

2,398

The following table summarizes the Company’s Warrants activities and status of Warrants as of December 31, 2024:


		Weighted		Average
		Average		Remaining
		Exercise Price		Period
Warrants	Warrants*	Per Share*		(Years)
Outstanding as of June 30, 2023	1,045,367	$	18.90	4.40
Issued	—		—	—
Redeemed	(997,404)		14.40	—
Forfeited	—		—	—
Exercised	—		—	—
Expired	—		—	—
Outstanding as of June 30, 2024	47,963	$	112.32	2.96
Issued	—		—	—
Redeemed	—		—	—
Forfeited	—		—	—
Exercised	—		—	—
Expired	—		—	—
Outstanding as of December 31, 2024	47,963	$	112.32	1.96

* Retrospectively restated for the 1-for-18 reverse share split on May 1, 2024.

F-29

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 18. SHARE-BASED COMPENSATION

Share-Based Awards Plan

The following is a summary of the share options activity:


		Weighted
		Average
		Exercise Price
Share Options	Shares*	Per Share*
Outstanding as of June 30, 2023	4,456	$	148.50
Granted	—		—
Forfeited	—		—
Exercised	—		—
Expired	—		—
Outstanding as of June 30, 2024	4,456	$	148.50
Granted	—		—
Forfeited	—		—
Exercised	—		—
Expired	—		—
Outstanding as of December 31, 2024	4,456	$	148.50

*Retrospectively restated for the 1-for-18 reverse share split on May 1, 2024.

The following is a summary of the status of options outstanding and exercisable as of December 31, 2024:

Outstanding Options

Exercisable Options

Average

Remaining

Average Exercise

Contractual

Average Exercise

Contractual

Price*

Number*

life (Years)

Price*

Number*

life (Years)

148.50

4,456

0.08

148.50

4,456

0.08

4,456

*Retrospectively restated for the 1-for-18 reverse share split on May 1, 2024.

The Share-based compensation expense recorded for share options granted was all nil for the six months ended December 31, 2023 and 2024, respectively. No unrecognized share-based compensation for share options as of December 31, 2024.

Restricted Shares to Senior Management

As of December 31, 2024, the Company has granted restricted Class A Ordinary Shares to senior management and employees as follows:

On February 28, 2022, the Company granted 1,642,331 (91,241 shares post 2024 Reverse Split) Class A Ordinary Shares to its employees as compensation cost for awards. The fair value of the restricted shares was $1,708,024 based on the closing share price $1.04 ($18.72 post 2024 Reverse Split) on February 28, 2022. These restricted shares will vest over three years with one-third of the shares vesting every year from the grant date. As of December 31, 2024, 1,094,888 (60,827 shares post 2024 Reverse Split) shares were vested, and the remaining 547,443 (30,412 shares post 2024 Reverse Split) shares will not be vested until February 28, 2025.

On March 15, 2023, the Company issued 1,000,000 (55,556 shares post 2024 Reverse Split) restricted Class A Ordinary Shares with a value of $372,600 based on the closing share price of $0.3726 ($6.71 post 2024 Reverse Split) on March 15, 2023 to its employee as compensation for service to the Company on new business exploration. The service period was six months from the date of grant. All of the restricted shares were issued on March 15, 2023, and the granted shares under this plan will not be vested until September 15, 2023.

F-30

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

On February 26, 2024, the Company granted 6,255,483 (347,527 shares post 2024 Reverse Split) restricted Class A Ordinary Shares to its management and staff. The fair value of the Class A restricted shares was $988,366 based on the fair value of share price $0.158 ($2.844 post 2024 Reverse Split) on February 26, 2024. All the restricted shares were not issued and the granted shares under this plan will not be vested until February 26, 2025.

Nil and nil restricted Class A restricted shares were issued and outstanding for the six months ended December 31, 2023 and 2024, respectively, for all the plans mentioned above.

As of December 31, 2024, the Company has granted restricted Class B Ordinary Shares to senior management as follows:

On February 28, 2022, the Company granted 1,600,000 restricted shares to its management as compensation cost for awards. The fair value of the restricted shares was $1,694,000 based on the fair value of share price $1.06 at February 28, 2022. These restricted shares vested immediately on the grant date. All granted shares under this plan are issued and outstanding on February 28, 2022.

On March 9, 2023, the Company granted 3,000,000 restricted shares to its management as compensation cost for awards. The fair value of the restricted shares was $3,025,000 based on the fair value of share price $1.01 at March 9, 2023. These restricted shares vested immediately on the grant date. All granted shares under this plan are issued and outstanding on March 9, 2023.

On February 26, 2024, the Company granted 12,900,000 restricted Class B Ordinary Shares to its management as compensation cost for awards. The fair value of the Class B restricted shares was $2,130,000 based on the fair value of share price $0.17 at February 26, 2024. These restricted shares vested immediately on the grant date. All granted shares under this plan are issued and outstanding on August 1, 2024.

Nil and 12,900,000 restricted Class B restricted shares were issued and outstanding for the six months ended December 31, 2023 and 2024, respectively, for all the plans mentioned above.

The share-based compensation expense recorded for restricted shares issued for management was ¥2,866,560 and ¥5,353,151 ($733,379) for the six months ended December 31, 2023 and 2024, respectively. The total unrecognized share-based compensation expense of restricted shares issued for management and employees as of December 31, 2024 was approximately ¥1.7 million ($0.24 million), which is expected to be recognized over a weighted average period of approximately 0.16 years.

Restricted Shares for services

As of December 31, 2024, the Company has granted restricted Class A Ordinary Shares to consultant as follows:

On November 10, 2021, the Company signed a service agreement with Starry. As the service consideration, the Company issued 500,000 (27,778 shares post 2024 Reverse Split) restricted Class A Ordinary Shares which vested in equal monthly amounts through the end of December 31, 2021. Half of the restricted Class A Ordinary Shares was valued based on the closing share price of $1.60 ($28.80 post 2024 Reverse Split) on December 10, 2021 and the other half was valued based on the closing share price of $1.31 ($23.58 post 2024 Reverse Split) on December 31, 2021. 250,000 (13,889 shares post 2024 Reverse Split) restricted Class A Ordinary Shares were issued on December 10, 2021 and the remaining 250,000 (13,889 shares post 2024 Reverse Split) restricted Class A Ordinary Shares were issued in January 2022.

On January 5, 2022, the Company signed a consulting agreement with Lintec Information Ltd (the “Consultant”). As the service consideration, the Company issued 1,050,000 (58,333 shares post 2024 Reverse Split) restricted Class A Ordinary Shares with a value of $1,354,500 based on the closing share price of $1.29 ($23.22 post 2024 Reverse Split) on January 5, 2022 to the Consultant as payment for being the Company’s investment and financial advisor for a period of one year. The vesting period of these shares was one year from the date of contract. All of the restricted shares were issued under this plan on January 5, 2022 and all of the granted shares under this plan was vested until January 5, 2023.

On March 15, 2023, the Company signed a consulting agreement with some business consultants (the “Consultants”). As the service consideration, the Company issued 1,000,000 (55,556 shares post 2024 Reverse Split) restricted Class A Ordinary Shares with a value of $372,600 based on the closing share price of $0.3726 ($6.71 post 2024 Reverse Split) on March 15, 2023 to the Consultants as compensation for acting as advisors to the Company on new business exploration. The vesting period of these shares was six months from the date of contract. All of the restricted shares were issued under this plan on March 15, 2023 and the granted shares under this plan have been vested until September 15, 2023.

F-31

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Nil and nil restricted Class A restricted shares were issued and outstanding during the six months ended December 31, 2023 and 2024, respectively, for all the plans mentioned above.

The share-based compensation expense recorded for restricted shares issued for service was ¥1,070,144 and nil for the six months ended December 31, 2023 and 2024, respectively.

Following is a summary of the restricted shares granted:


Restricted share grants		Shares*
Non-vested as of June 30, 2023		171,938
Granted		347,527
Vested		(141,526)
Non-vested as of June 30, 2024		377,939
Granted		—
Vested		—
Non-vested as of December 31, 2024		377,939

*Retrospectively restated for the 1-for-18 reverse share split on May 1, 2024.

The following is a summary of the status of restricted share at December 31, 2024:


Outstanding Restricted Shares
			Average
			Remaining
Fair Value per			Amortization
Share		Number	Period (Years)
$	18.72	30,412	0.16
$	2.84	347,527	0.16
		377,939

NOTE 19. INCOME TAX

The Company is not subject to any income taxes in the United States or the Cayman Islands and had minimal operations in jurisdictions other than the PRC. BHD and Nanjing Recon are subject to PRC’s income taxes as PRC domestic companies. The Company follows Implementing Rules for the Enterprise Income Tax Law (“Implementing Rules”), which took effect on January 1, 2008 and unified the income tax rate for domestic-invested and foreign-invested enterprises at 25%.

Nanjing Recon was approved as a government-certified high-technology company and is subject to a reduced income tax rate of 15% through November 30, 2019. Nanjing Recon reapplied for a high-technology company certificate, and the new certificate was approved as November 22, 2019 and expired on November 22, 2022. Nanjing Recon reapplied for a high-technology company certificate, and the new certificate was approved as October 12, 2022 and will expire on October 12, 2025.

As approved by the domestic tax authority in the PRC, BHD was recognized as a government-certified high-technology company on November 25, 2009 and is subject to a reduced income tax rate of 15% through November 25, 2018. BHD reapplied for a high-technology company certificate, and the new certificate was approved as October 31, 2018 and expired on October 31, 2021. BHD reapplied for a high-technology company certificate, and the new certificate was approved as December 17, 2021 and will expire on December 17, 2024. BHD reapplied for a high - technology company certificate, and the new certificate was approved as December 31, 2024 and will expire on December 31, 2027.

F-32

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Income (loss) before provision for income taxes consisted of:


	For the six months ended December 31,
	2023		2024		2024
	RMB		RMB		US Dollars
	(Unaudited)		(Unaudited)		(Unaudited)
Outside China areas	¥	(14,621,317)	¥	(6,118,811)	$	(838,274)
China		(8,390,493)		(14,609,179)		(2,001,448)
Total	¥	(23,011,810)	¥	(20,727,990)	$	(2,839,722)

Deferred tax assets, net is composed of the following:


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
	RMB		(Unaudited)		(Unaudited)
Deferred tax assets:
Allowance for credit losses	¥	1,652,102	¥	1,125,857	$	154,242
Impairment for inventory		221,290		21,868		2,996
Net operating loss carryforwards		25,843,951		25,574,293		3,503,665
Subtotal		27,717,343		26,722,018		3,660,903
Less: Valuation allowance		(27,437,564)		(26,442,239)		(3,622,572)
Total deferred tax assets, net	¥	279,779	¥	279,779	$	38,331
Deferred tax liabilities:
Accelerated amortization of intangible assets		(132,891)		(132,891)		(18,207)
Gain on the previously held equity method investment		(146,888)		(146,888)		(20,124)
Recognition of customer relationship arising from business combinations		—		—		—
Total deferred tax liabilities		(279,779)		(279,779)		(38,331)
Deferred tax assets, net	¥	—	¥	—	$	—

The Company’s subsidiaries, VIEs and VIEs’ subsidiaries incurred a cumulative net operating loss (“NOL”) which may reduce future corporate taxable income. As of June 30, 2024, the cumulative NOL was approximately ¥125.8 million. During the six months ended December 31, 2024, the Company’s subsidiaries, VIEs and VIEs’ subsidiaries incurred an additional NOL carryforwards of approximately ¥8.4 million ($1.2 million), resulting in a cumulative NOL carryforwards of approximately ¥134.2 million ($18.4 million) as of December 31, 2024.

The NOL will expire over the next five years as follows:


	RMB		US Dollars
Twelve months ending December 31,	(Unaudited)		(Unaudited)
2025	¥	19,617,124		2,687,535
2026		32,533,742		4,457,104
2027		27,137,905		3,717,878
2028		34,868,363		4,776,946
2029		20,017,992		2,742,454
Total	¥	134,175,126	$	18,381,917

F-33

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

The Company’s income tax expense (benefit) is comprised of the following:


	For the six months ended December 31,
	2023		2024		2024
	RMB		RMB		US Dollars
	(Unaudited)		(Unaudited)		(Unaudited)
Current income tax provision	¥	96,041	¥	1,609	$	220
Deferred income tax provision		—		—		—
Expense for income tax	¥	96,041	¥	1,609	$	220

NOTE 20. NON-CONTROLLING INTEREST

Non-controlling interest consisted of the following:


	As of June 30, 2024
			Nanjing		Gan Su		Qinghai
	BHD		Recon		BHD		BHD		FGS		Total		Total
	RMB		RMB		RMB		RMB		RMB		RMB		US Dollars
Paid-in capital	¥	1,651,000	¥	200,000	¥	4,805,000	¥	—	¥	—	¥	6,656,000	$	917,904
Capital contribution receivable due from non-controlling Interest		—		—		—		—		(48,870,000)		(48,870,000)		(6,739,481)
Unappropriated retained earnings (deficit)		3,477,494		3,616,001		(7,547,154)		(1,581,474)		(2,130,804)		(4,165,937)		(358,742)
Accumulated other comprehensive loss		(18,850)		(11,853)		—		—		—		(30,703)		(4,234)
Valuation increase shared by minority shareholders		—		—		—		—		34,790,000		34,790,000		4,797,760
Total non-controlling interests	¥	5,109,644	¥	3,804,148	¥	(2,742,154)	¥	(1,581,474)	¥	(16,210,804)	¥	(11,620,640)	$	(1,386,793)


	As of December 31, 2024
			Nanjing		Gan Su		Qinghai
	BHD		Recon		BHD		BHD		FGS		Total		Total
	RMB		RMB		RMB		RMB		RMB		RMB		US Dollars
Paid-in capital	¥	1,651,000	¥	200,000	¥	4,805,000	¥	—	¥	—	¥	6,656,000	$	911,868
Capital contribution receivable due from non-controlling Interest		—		—		—		—		(48,870,000)		(48,870,000)		(6,695,163)
Unappropriated retained earnings (deficit)		3,477,493		3,616,001		(8,081,772)		(1,575,468)		(1,743,461)		(4,307,207)		(590,084)
Accumulated other comprehensive loss		(18,850)		(11,853)		—		—		—		(30,703)		(4,206)
Valuation increase shared by minority shareholders		—		—		—		—		34,790,000		34,790,000		4,766,210
Total non-controlling interests	¥	5,109,643	¥	3,804,148	¥	(3,276,772)	¥	(1,575,468)	¥	(15,823,461)	¥	(11,761,910)	$	(1,611,375)

F-34

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 21. CONCENTRATIONS

Credit risk

As of June 30, 2024 and December 31, 2024, approximately ¥90.3 million and ¥ 66.2 million ($9.1 million) of the Company’s cash was on deposit at financial institutions in the PRC, respectively. Per PRC regulations, the maximum insured bank deposit amount is RMB500,000 for each financial institution. The Company’s total unprotected cash held in banks amounted to approximately ¥84.4 million and ¥60.4 million ($8.3 million) as of June 30, 2024 and December 31, 2024, respectively. As of June 30, 2024 and December 31, 2024, approximately ¥108.7 million and ¥79.1 million ($10.8 million) of the Company’s cash was on deposit at financial institutions in the Hong Kong, respectively. Per Hong Kong regulations, the maximum insured bank deposit amount is HKD 800,000 for each financial institution. The Company’s total unprotected cash held in banks amounted to approximately ¥105.5 million and ¥76.5 million ($10.5 million) as of June 30, 2024 and December 31, 2024, respectively.

Customer concentration risk

For the six months ended December 31, 2023, CNPC represented 56%, SINOPEC represented 19%, CNOOC represented 15%, and another customer represented 10% of the Company’s total revenue, respectively. At December 31, 2023, CNPC accounted for 34%, SINOPEC represented 14%, CNOOC represented 21%, and another customer accounted for 30% of the Company’s trade accounts receivable, net, respectively.

For the six months ended December 31, 2024, CNPC represented 50%, SINOPEC represented 8%, CNOOC represented 9%, and another customer represented 33% of the Company’s total revenue, respectively. At December 31, 2024, CNPC accounted for 29%, SINOPEC represented 21%, CNOOC represented 9%, and another customer accounted for 40% of the Company’s trade accounts receivable, net, respectively.

NOTE 22. COMMITMENTS AND CONTINGENCY

(a) Contingency

Severance payments

The Labor Contract Law of the PRC requires employers to assure the liability of severance payments if employment contracts are terminated. The employers will be liable for one month of severance pay for each year of the service provided by the employees. As of December 31, 2024, the Company estimated its severance payments of approximately ¥9.0 million ($1.2 million) which has not been reflected in its consolidated financial statements, because management cannot predict what the actual payment, if any, will be in the future.

Legal contingencies

There exists a legal dispute between Gansu BHD and its minority shareholders regarding company operations. Production activates were not allowed during this period. Additionally, the enterprise is currently renewing its hazardous waste permit and is in a state of abnormal operation.

(b) Purchase commitment

The total future minimum purchase commitment under the non-cancellable purchase contracts as of December 31, 2024 are payable as follows:


	RMB		US Dollars
Twelve months ending December 31,	(Unaudited)		(Unaudited)
2025	¥	27,265,303	$	3,735,331
Total minimum payments required	¥	27,265,303	$	3,735,331

F-35

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(c) Leases Commitment

The Company has entered into several operating leases for office premises with the property owner and service agreements with a property service company, respectively. According to the agreements, the Company is required to pay rent and property management fees for future periods, of which, future rent payments have been included in lease liabilities as disclosed in Note 10, and the future property management fees payable as of December 31, 2024 are disclosed as follows:


Twelve months ending December 31,	RMB		US Dollars
2025	¥	590,975	$	80,963
2026		613,362		84,030
2027		201,349		27,585
Total	¥	1,405,686	$	192,578

NOTE 23. RELATED PARTY TRANSACTIONS AND BALANCES

Leases from related parties - The Company has various agreements for the lease of office space owned by the founders and their family members. The terms of the agreement state that the Company will continue to lease the property at a monthly rent of ¥96,875 ($13,272) with annual rental expense at ¥1.2 million ($0.2 million).

The details of leases from related parties are as below:


			Monthly Rent		Monthly Rent
Lessee	Lessor	Rent Period	RMB		US Dollars
Nanjing Recon	One of the founders	April 1, 2024 - March 31, 2026	¥	40,000	$	5,480
BHD	One of the founders	January 1, 2024- Dec 31, 2025		33,250		4,555
BHD	One of the founders	January 1, 2024- Dec 31, 2025		23,625		3,237

As of June 30, 2024, the operating lease ROU assets and corresponding operating lease liabilities of leases from related parties was ¥1,769,840 and ¥2,111,090, respectively.

As of December 31, 2024, the operating lease ROU assets and corresponding operating lease liabilities of leases from related parties was ¥1,269,146 ($173,872) and ¥1,951,647 ($267,374), respectively.

Guarantee/collateral related parties – The Company’s founders provide guarantee and collateral for the Company’s short-term bank loans (see Note 13).

NOTE 24. VARIABLE INTEREST ENTITIES

VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision-making ability. All VIEs and their subsidiaries with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

F-36

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Summary information regarding consolidated VIEs and their subsidiaries is as follows:


	June 30, 2024		December 31, 2024		December 31, 2024
	RMB		RMB		US Dollars
ASSETS
Current Assets
Cash	¥	35,357,534	¥	23,868,345	$	3,269,950
Restricted cash		848,936		8,123		1,113
Notes receivable		1,341,820		3,206,733		439,321
Accounts receivable, net		38,631,762		40,366,074		5,530,129
Inventories, net		1,128,912		1,541,020		211,119
Other receivables, net		3,514,776		4,043,246		553,922
Loans to third parties		31,008,330		20,713,978		2,837,803
Purchase advances, net		30,691		15,062		2,063
Contract costs, net		48,335,817		41,628,922		5,703,139
Prepaid expenses		138,683		412,109		56,457
Operating lease right-of-use assets, net - current		1,026,599		—		—
Total current assets		161,363,860		135,803,612		18,605,016

Property and equipment, net		22,137,940		20,859,877		2,857,791
Long-term loan to third parties		—		18,500,000		2,534,490
Operating lease right-of-use assets, net - non-current		7,695,347		7,339,716		1,005,537
Total Assets	¥	191,197,147	¥	182,503,205	$	25,002,834

LIABILITIES
Short-term bank loans	¥	12,425,959	¥	11,582,636	$	1,586,815
Accounts payable		10,187,518		14,100,871		1,931,811
Other payables		1,160,065		1,272,678		174,356
Other payable- related parties		2,252,236		1,740,482		238,445
Contract liabilities		1,820,481		4,098,136		561,442
Accrued payroll and employees’ welfare		2,030,300		2,155,740		295,335
Intercompany payables*		269,423,190		269,395,125		36,906,981
Taxes payable		933,219		1,624,242		222,520
Short-term borrowings - related parties		10,002,875		10,018,208		1,372,489
Operating lease liabilities - current		3,741,247		3,891,976		533,198
Total current liabilities		313,977,090		319,880,094		43,823,392

Operating lease liabilities - non-current		3,971,285		2,781,196		381,022
Long-term borrowings - related party		10,000,000		10,000,000		1,369,994
Total Liabilities	¥	327,948,375	¥	332,661,290	$	45,574,408

*Intercompany payables are eliminated upon consolidation.

The financial performance of VIEs and their subsidiaries reported in the unaudited condensed consolidated interim statement of operations and comprehensive income for the six months ended December 31, 2023 includes revenues of ¥45,256,672 ($6,200,139), operating expenses of ¥21,646,029 ($2,965,494), and net loss of ¥6,890,440 ($943,986). The financial performance of VIEs and their subsidiaries reported in the unaudited condensed consolidated interim statement of operations and comprehensive income for the six months ended December 31, 2024 includes revenues of ¥42,069,270 ($5,763,466), operating expenses of ¥26,163,114 ($3,584,332), and net loss of ¥12,484,924 ($1,710,428).

F-37

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 25. SEGMENT REPORTING

ASC 280, “Segment Reporting,” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operation results by the revenue of different products. Based on management’s assessment, the Company has determined that it has four operating segments: automation product and software, equipment and accessories, oilfield environmental protection and platform outsourcing services.

The following tables present summary information by segment for the six months ended December 31, 2023 and 2024, respectively:


	For the six months ended December 31,
	2023		2024		2024
	RMB		RMB		US Dollars
	(Unaudited)		(Unaudited)		(Unaudited)
Automation product and software	¥	17,552,892	¥	20,923,759	$	2,866,543
Equipment, accessories and others		17,867,404		15,684,480		2,148,765
Oilfield environmental protection		8,053,696		2,721,894		372,898
Platform Outsourcing Services		1,782,680		2,739,137		375,260
Total revenue	¥	45,256,672	¥	42,069,270	$	5,763,466


	For the six months ended December 31, 2024
	Automation		Equipment,		Oilfield		Platform
	product and		accessories		environmental		outsourcing		Chemical
	software		and others		protection		services		recycle		Total
	RMB		RMB		RMB		RMB		RMB		RMB
Revenue	¥	20,923,759	¥	15,684,480	¥	2,721,894	¥	2,739,137	¥	—	¥	42,069,270
Cost of revenue and related tax		12,381,024		11,151,894		4,852,390		329,160		—		28,714,468
Gross profit	¥	8,542,735	¥	4,532,586	¥	(2,130,496)	¥	2,409,977	¥	—	¥	13,354,802
Depreciation and amortization	¥	255,103	¥	440,240	¥	1,028,723	¥	—	¥	150,003	¥	1,874,069
Capital expenditures	¥	27,300	¥	557,106	¥	—	¥	—	¥	—	¥	584,406
Timing of revenue recognition:								—
Goods transferred at a point in time		17,064,210		15,684,480		2,721,894		2,139,137		—		37,609,721
Services rendered over time		3,859,549		—		—		600,000		—		4,459,549
Total revenue	¥	20,923,759	¥	15,684,480	¥	2,721,894	¥	2,739,137	¥	—	¥	42,069,270

F-38

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS


	For the six months ended December 31, 2023
	Automation		Equipment,		Oilfield		Platform
	product and		accessories		environmental		outsourcing
	software		and others		protection		services		Total
	RMB		RMB		RMB		RMB		RMB
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenue	¥	17,552,892	¥	17,867,404	¥	8,053,696	¥	1,782,680	¥	45,256,672
Cost of revenue and related tax		14,040,976		12,778,042		6,020,271		311,641		33,150,930
Gross profit	¥	3,511,916	¥	5,089,362	¥	2,033,425	¥	1,471,039	¥	12,105,742
Depreciation and amortization	¥	253,397	¥	143,927	¥	1,029,646	¥	—	¥	1,426,970
Capital expenditures	¥	83,253	¥	116,191	¥	—	¥	—	¥	199,444
Timing of revenue recognition
Goods transferred at a point in time		14,368,994		17,867,404		8,053,696		166,899		40,456,993
Services rendered over time		3,183,898		—		—		1,615,781		4,799,679
Total revenue	¥	17,552,892	¥	17,867,404	¥	8,053,696	¥	1,782,680	¥	45,256,672


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
	RMB		(Unaudited)		(Unaudited)
Total assets:
Automation product and software	¥	132,194,082	¥	133,099,628	$	18,234,574
Equipment, accessories and others		145,316,223		137,069,712		18,778,474
Oilfield environmental protection		78,023,782		76,766,728		10,516,999
Platform outsourcing services		61,931,606		61,196,037		8,383,823
Chemical recycling		134,923,821		133,581,927		18,300,647
Total assets	¥	552,389,514	¥	541,714,032	$	74,214,517

NOTE 26. SUBSEQUENT EVENTS

These consolidated financial statements were approved by management and available for issuance on March 31, 2025, and the Company has evaluated subsequent events through this date.

NOTE 27. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

Pursuant to the requirements of Rules 12-04(a), 5-04(c), and 4-08(e)(3) of Regulation S-X, the condensed financial information of the parent company shall be filed when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. The Company performed a test on the restricted net assets of consolidated subsidiaries in accordance with such requirements and concluded that it was applicable to the Company as the restricted net assets of the Company’s PRC subsidiary and VIEs exceeded 25% of the consolidated net assets of the Company. Therefore, the condensed financial statements for the parent company are included herein.

For purposes of the above test, restricted net assets of consolidated subsidiaries and VIEs shall mean that amount of the Company’s proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred to the parent company by subsidiaries and VIEs in the form of loans, advances, or cash dividends without the consent of a third party.

The condensed financial information of the parent company has been prepared using the same accounting policies as set out in the Company’s consolidated financial statements except that the parent company used the equity method to account for investment in its subsidiaries and VIEs. Such investment is presented on the condensed balance sheets as “Investment in subsidiaries and VIEs” and the respective profit or loss as “Equity in earnings of subsidiaries and VIEs” on the condensed statements of income.

F-39

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

The footnote disclosures contain supplemental information relating to the operations of the Company and, as such, these statements should be read in conjunction with the notes to the consolidated financial statements of the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

The Company did not pay any dividend for the periods presented. As of June 30, 2024 and December 31, 2024, there were no material contingencies, significant provisions for long-term obligations, or guarantees of the Company, except for those which have been separately disclosed in the consolidated financial statements, if any.

RECON TECHNOLOGY, LTD

PARENT COMPANY BALANCE SHEETS (UNAUDITED)


	June 30,		December 31,		December 31,
	2024		2024		2024
			RMB		US Dollars
	RMB		(Unaudited)		(Unaudited)
ASSETS
Cash	¥	16,473,018	¥	74,929,137	$	10,265,250
Short-term investments		88,091,794		—		—
Due from intercompany*		375,736,992		377,505,218		51,718,003
Other current assets		170,158,947		198,920,232		27,251,960
Total Current Assets		650,460,751		651,354,587		89,235,213

Investment in subsidiaries and VIEs		(145,408,577)		(161,500,924)		(22,125,536)
Total Assets	¥	505,052,174	¥	489,853,663	$	67,109,677

LIABILITIES AND SHAREHOLDERS’ EQUITY
Other current liabilities		2,490,668		1,299,299		178,003
Total Current Liabilities		2,490,668		1,299,299		178,003

Warrant liability - non-current		6,969		17,504		2,398
Total Liabilities	¥	2,497,637	¥	1,316,803	$	180,401

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY
Class A ordinary shares, $0.0001 U.S. dollar par value, 500,000,000 shares authorized; 7,987,959 shares and 7,987,959 shares issued and outstanding as of June 30, 2024 and December 31, 2024, respectively**		99,634		99,634		13,650
Class B ordinary shares, $0.0001 U.S. dollar par value, 80,000,000 shares authorized; 7,100,000 shares and 20,000,000 shares issued and outstanding as of June 30, 2024 and December 31, 2024, respectively**		4,693		14,038		1,923
Additional paid-in capital**		681,476,717		686,830,523		94,095,396
Accumulated deficit		(216,163,156)		(236,751,485)		(32,434,820)
Accumulated other comprehensive income		37,136,649		38,344,150		5,253,127
Total Shareholders’ Equity		502,554,537		488,536,860		66,929,276

Total Liabilities and Shareholders’ Equity	¥	505,052,174	¥	489,853,663	$	67,109,677

*	Due from intercompany are eliminated upon consolidation.

F-40

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

RECON TECHNOLOGY, LTD

PARENT COMPANY STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)


	For the six months ended December 31,
	2023		2024		2024
	RMB		RMB		U.S. Dollars
	(Unaudited)		(Unaudited)		(Unaudited)
Revenues	¥	—	¥	—	$	—
Cost of revenues		—		—		—
Gross profit		—		—		—

General and administrative expenses		11,698,953		11,962,691		1,638,882
Loss from operations	¥	(11,698,953)	¥	(11,962,691)	$	(1,638,882)

Loss in fair value changes of warrants liability		(1,941,195)		(10,327)		(1,415)
Other income (expenses)		(960,280)		5,846,562		800,976
Equity in earnings of subsidiaries, VIEs and VIEs’ subsidiaries		(7,954,486)		(14,461,878)		(1,981,269)
Net loss	¥	(22,554,914)	¥	(20,588,334)	$	(2,820,590)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
Foreign currency translation adjustments related to investments in subsidiaries, VIEs and VIEs’ subsidiaries		(4,609,399)		1,207,501		165,427
Comprehensive loss attributable to the company	¥	(27,164,313)	¥	(19,380,833)	$	(2,655,163)

F-41

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

RECON TECHNOLOGY, LTD

PARENT COMPANY STATEMENTS OF CASH FLOWS (UNAUDITED)


	For the six months ended December 31,
	2023		2024		2024
	RMB		RMB		U.S. Dollars
	(Unaudited)		(Unaudited)		(Unaudited)
Cash flows from operating activities:
Net loss	¥	(22,554,914)	¥	(20,588,334)	$	(2,820,590)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Loss in fair value changes of warrants liability		10,461,075		10,327		1,415
Restricted shares issued for management and employees		2,866,560		5,353,151		733,379
Accrued interest income from loans to third parties		(3,088,457)		(5,381,364)		(737,244)
Accrued interest income from short-term investment		(2,352,250)		—		—
Restricted shares issued for services		1,070,144		—		—
Equity in earnings of subsidiaries and VIEs		7,954,486		14,461,878		1,981,269
Other current assets		7,289,074		78,508		10,756
Other current liabilities		(2,516,342)		(1,191,370)		(163,217)
Net cash used in operating activities		(870,624)		(7,257,204)		(994,232)

Cash flows from investing activities:
Repayments from loans to third parties		24,849,650		—		—
Payments made for loans to third parties		—		(21,897,900)		(3,000,000)
Payments for short-term investments		(113,598,400)		—		—
Redemption of short - term investments		—		88,892,092		12,178,167
Due from intercompany, VIEs and VIEs’ subsidiaries		(64,916,652)		(1,768,224)		(242,246)
Net cash (used in) generated by investing activities		(153,665,402)		65,225,968		8,935,921

Net cash used in financing activities:
Proceeds from sale of common share, net of issuance costs		—		(810,082)		(110,981)
Redemption of warrants		(31,866,604)		—		—
Net cash used in financing activities		(31,866,604)		(810,082)		(110,981)

Effect of exchange rate fluctuation on cash		(15,086,688)		1,297,437		177,748

Net (decrease) increase in cash		(201,489,318)		58,456,119		8,008,456

CASH, beginning of period		236,146,589		16,473,018		2,256,794

CASH, end of period	¥	34,657,271	¥	74,929,137	$	10,265,250

F-42

Exhibit 99.2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1.The following discussion and analysis of our company’s financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors.

Overview

2.We are a company with limited liability incorporated in 2007 under the laws of the Cayman Islands. Headquartered in Beijing, we have been providing products and services to oil and gas companies and their affiliates through Nanjing Recon Technology Co. Ltd (“Nanjing Recon”) and Beijing BHD Petroleum Technology Co, Ltd (“BHD”) and their affiliates, hereafter referred to as the domestic companies (the “Domestic Companies”), which are established under the laws of the PRC. From 2017, we have been providing service to companies in other power energy industries such as the electronic power industry and the renewable energy industry. As the Company contractually controls the Domestic Companies, we serve as the center of strategic management, financial control and human resources allocation. To this end, our company and our subsidiaries, Recon Investment Ltd. (“Recon-IN”), Recon Hengda Technology (Beijing) Co., Ltd. (“Recon-BJ”), Shandong Recon Renewable Resources Technology Co., Ltd. (“Recon - SD”) and Guangxi Recon Renewable Resources Co., Ltd. (“Recon - GX”) are contractually engaged with the following PRC VIE companies and their subsidiaries: Beijing BHD Petroleum Technology Co., Ltd. (“BHD”), Future Gas Station (Beijing) Technology, Ltd. (“FGS”), Nanjing Recon Technology Co., Ltd. (“Nanjing Recon”), Gan Su BHD Environmental Technology Co. Ltd. (“Gan Su BHD”), Huang Hua BHD Petroleum Equipment Manufacturing Co. Ltd. (“HH BHD”), and Qing Hai BHD New Energy Technology Co. Ltd. (“Qing Hai BHD”) (collectively, the “Domestic Companies”), which provide services designed to automate and enhance the extraction of and facilitate the sale of petroleum products. Due to this contractual control and our obligation to bear the losses of the Domestic Companies, we consider them to be variable interest entities (“VIEs”) for accounting purposes and consolidate their results in our financial statements.

3.Through Nanjing Recon and BHD, our business is mainly focused on the upstream sectors of the oil and gas industry. From 2018, our business has been expanding to the downstream of the energy industry– the civil and industrial heating furnaces market, electric and coal chemical industry and the energy service management industry. As we acquired major equity interest of FGS in year 2021, we also extend our business to fuel market. We derive our revenue from the sales and provision of (1) automation products and projects, (2) equipment and installment for heating furnaces and overall energy saving resolution, (3) chemical products and overall resolution for wastewater and oily sludge treatment, (4) downhole services, production enhancement, engineering and project services for aforementioned, and (5) platform development services for gas stations and other entities that will provide services under the scenario of refuel.

●

Nanjing Recon: Nanjing Recon is a high-tech company that specializes in automation services for oilfield companies. It mainly focuses on providing automation solutions to the oil exploration industry, including monitoring wells, automatic metering to the joint station production, process monitor, and a variety of oilfield equipment and control systems. From 2018, Nanjing Recon also provides automation products and services to other segments of the energy industry, such as the new energy industry, electric power and coal chemical industries.

●

BHD: BHD is a high-tech company that specializes in transportation equipment and stimulation productions and services. Possessing proprietary patents and substantial industry experience, BHD has also been expanding services to oilfield wastewater and oily sludge treatment, and extended its heating products and resolutions to the civil market by leveraging its advantage on furnace products.

4.We entered into the wasted plastic chemical recycling business in year 2023 and established two new wholly-owned subsidiaries, Shandong Recon Renewable Resources Technology Co., Ltd (“Recon-SD”) on October 10, 2023, and Guangxi Recon Renewable Resources Co., Ltd. (“Recon-GX”) on February 22, 2024 through Recon-IN to serve customers located in different areas.

Recent Industry Developments and Business Outlook

5.The international crude oil futures prices have been fluctuating. In the first half of the 2024 fiscal year, factors such as the ongoing Russia-Ukraine conflict, tensions in the Middle East, and OPEC+ production cuts have further tightened global crude oil supply, driving prices to repeatedly hit new highs, international oil prices generally exhibited a pattern of wide fluctuations at elevated levels. Moving into the first half of the 2025 fiscal year, geopolitical tensions may ease, particularly as the Russia-Ukraine conflict and Middle Eastern tensions show signs of alleviation. This could cause oil prices to lose the premium support from geopolitical risks, diminishing the momentum for further price increases. At the same time, global economic growth is slowing, especially with China’s economic recovery falling short of expectations, which has dampened the outlook for oil demand growth. In the current complex and volatile situation, the Chinese government is actively taking measures to fully maintain a stable development situation. Through a series of policy initiatives, it is promoting the prosperity of the domestic consumer market and simultaneously driving the improvement of productivity. Domestic oilfield companies are also taking proactive actions, striving to maintain stable business operations and ensuring the smooth and orderly conduct of production and operations. At present, the company’s business as a whole remains relatively stable, demonstrating strong resilience and adaptability.

6.At the same time, we believe that the demand from oilfield customers for green, low-carbon, digitized and intelligent solutions to improve recovery and production efficiency will continue to rise, in order to ensure a continuous and stable supply of high-quality oil and gas resources to meet market demand.

7.With plastic waste ballooning into a global environmental crisis, and oil and chemical companies focus more on ESG management, we see increasing opportunities on circular economy and a growing market demand for sustainable and recycled materials, in which products and materials are reused, remanufactured and recycled. Chemical recycling plays an important role in achieving these goals by preserving the value of plastic materials. From early 2023, we have been participating in the chemical recycling of low-value plastics. We have signed purchase intentions with some multinational and local chemical companies, and based on these demands, we have started the construction of our plants. In the second half of 2024, we have completed some government approvals and pre-approval procedures for the plants. We expect that the construction, installation, and commissioning phases will be completed in 2025.

Growth Strategy

8.As a small company focused on the Chinese market, our basic strategy focuses on developing our onshore oilfield business in the upstream sector of the industry. We continuously focus on providing high quality products and services in oilfields in which we have a geographical advantage. This helps us avoid conflicts of interest with larger private companies while protecting our position within this market segment. Our mission is to increase the automation and safety levels of industrial petroleum production in China and to improve the underdeveloped working process and management mode used by many companies by providing advanced technologies. At the same time, we are always looking to improve our business and to increase our earning capability.

9.Currently, as more markets in China’s energy industry are open to non-state-owned companies, we are also seeking for opportunities in other markets. We believe our experience and deep knowledge of the energy industry, especially in oil and gas, will always be the long-term foundation for the company’s growth. By tapping into technological advances in recent years, such as solar energy and the Smart Industry and Industrial Internet, which is bringing about a fundamental change in the way factories and workplaces function by making them safer, more efficient, more flexible and more environmentally friendly. We expect to create more profitable business lines.

10.Also, to diversify our revenue stream and lower the risk of concentration, we will continue to seek new opportunities in other industries by leveraging our knowledge of intelligent equipment and the “internet of things” (IoT), which is a crucial component of the Smart Industry and Industrial Internet.

11.We also see threatens from climate changes and opportunities from sustainable investments. We have also begun to engage in green, low-carbon and recyclable resource businesses to secure our long-term growth.

Trend Information

12.Other than as disclosed elsewhere in this report we are not aware of any trends, uncertainties, demands, commitments, or events since the beginning of our fiscal year 2025 which are reasonably likely to have a material effect on our net revenue, income from operations, profitability, liquidity or capital resources, or would cause the disclosed financial information to be not necessarily indicative of future operating results or financial condition.

Factors Affecting Our Results of Operations

13.Our operating results in any period are subject to general conditions typically affecting the Chinese oilfield service industry which include but are not limited to:

●

oil and gas prices;

●

the amount of spending by our customers, primarily those in the oil and gas industry;

●

growing demand from large corporations for improved 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 from other oilfield service solution providers, especially those targeting the Chinese oil and gas industry;

●

the ongoing development of the oilfield service market in China;

●

unpredictability of policies regarding the energy and internet sectors; and

●

inflation and other macroeconomic factors.

14.Unfavorable changes in any of these general conditions could negatively affect the number and size of the projects we undertake, 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.

15.Our operating results in any period are more directly affected by company-specific factors including:

●

our revenue growth, in terms of the proportion of our business dedicated to large companies and our ability to successfully develop, introduce and market new solutions and services;

●

our ability to increase our revenue from both old and new customers in the oil and gas industry in China;

●

our ability to effectively manage our operating costs and expenses; and

●

our ability to effectively implement any targeted acquisitions and/or strategic alliances so as to provide efficient access to markets and industries in the oil and gas industry in China.

Major Critical Accounting Policies and Estimates

Consolidation of VIEs

16.A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary. The primary beneficiary has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The Company performs ongoing assessments to determine whether an entity should be considered a VIE and whether an entity previously identified as a VIE continues to be a VIE and whether the Company continues to be the primary beneficiary.

17.Assets recognized as a result of consolidating VIEs do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of the consolidated VIEs.

Estimates and Assumptions

18.The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in United States of America (“US GAAP”), which requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Estimates are adjusted to reflect actual experience when necessary. Significant accounting estimates reflected in the Company’s consolidated financial statements include allowance for credit losses related to accounts receivable, other receivables and purchase advances, allowance for inventory, the useful lives of property and equipment, valuation allowance for deferred tax assets, impairment assessment for long-lived assets, goodwill and investment in unconsolidated entity, the discount rate for lease and investment, valuation of the convertible notes, price purchase allocation for business combination and the fair value of share- based payments. The use of estimates is an integral component of the financial reporting process; actual results could differ from those estimates.

19.The key assumptions underlying the Company’s accounting for material arrangements and the reasonably likely material effects of resolving any uncertainties on the Company’s allowance for credit losses related to purchase advances. The production of the Company’s products requires custom-made equipment from its suppliers. To ensure that it can secure the required customized equipment, the Company often needs to make full prepayment for its intended purchases. As a standard practice in the petroleum extraction industry, the Company generally must submit a bid in order to secure the sales contract. The bidding process generally takes between one month to one year and the timing depends on the size of the overall project, which timing and size are generally controlled by its client. In order to secure timely purchase delivery and to meet its product delivery schedule, the Company normally prepays for the purchase advances if the Company believes that it is more than likely to win the bid for the sales contract which is accounted as pre-contract costs. After winning the bid and securing the sale contract, the Company normally needs to deliver its products approximately within one week to six months. Based on the Company’s historical experience, the Company generally is able to realize its purchase advances on the customized equipment that it orders. If it subsequently confirms that the Company is unable to secure the planned contracts with a customer after making the advance payments for these planned contracts, the Company evaluates the probable recoverability of the pre-contract cost and charges to expenses when the Company determines that the recovery of such pre-contract cost is improbable.

Fair Values of Financial Instruments

20.The U.S. GAAP accounting standards regarding fair value of financial instruments and related fair value measurements define fair value, establish a three-level valuation hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

21.The three levels of inputs are defined as follows:

22.Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

23.Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

24.Level 3 inputs to the valuation methodology are unobservable.

25.Accounting guidance also describes three main approaches to measure the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

26.The carrying amounts reported in the consolidated balance sheets for short-term investments, accounts receivable, notes receivable, other receivables, purchase advances, contract cost, accounts payable, other payable, accrued liabilities, contract liabilities, short-term bank loans and short-term borrowings – related parties approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amounts of the long-term borrowings due to related party approximate its fair value because the stated interest rates approximate rates currently offered by financial institutions for similar debt instruments of comparable credit risk and maturities.

Business Combinations

27.The Company accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805 “Business Combinations”. The consideration transferred in an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations and all contractual contingencies as of the acquisition date. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total costs of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the acquiree, the difference is recognized directly in the consolidated statements of operation and comprehensive income (loss). During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operation and comprehensive income (loss).

28.In a business combination considered as a step acquisition, the Company remeasures the previously held equity interest in the acquiree immediately before obtaining control at its acquisition-date fair value and the re-measurement gain or loss, if any, is recognized in the consolidated statements of operation and comprehensive income (loss).

Revenue Recognition

29.In accordance with ASC 606, “Revenue from Contracts with Customers”, revenue is recognized when all of the following five steps are met: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; (v) recognize revenue when (or as) each performance obligation is satisfied. The core principle underlying the new revenue recognition Accounting Standards Update (“ASU”) is that the Company recognizes revenue to represent the transfer of goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. The Company identifies contractual performance obligations and determines whether revenue should be recognized at a point in time or over time, based on when goods or services are provided to a customer.

Disaggregation of Revenue

30.Revenue are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

31.The following items represent the Company’s revenue disaggregated by revenue source. In accordance with ASC 606-10-50-5, the Company selects categories to present disaggregated revenue that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors and delivery conditions of products and fulfillment of obligations.

32.The Company’s disaggregation of revenue for the six months ended December 31, 2023 and 2024 is disclosed in Note 25 to accompanying consolidated financial statements.

Automation Products and Software; Equipment, Accessories and Others

33.The Company generates revenue primarily through delivery of standard or customized products and equipment, including automation products, furnaces and related accessories. Revenue is recognized when products are delivered, and acceptance reports are signed off by customers.

34.The sale of automation products or specialized equipment when combined with services represent a single performance obligation for the development and construction of a single asset. The Company may also provide design or installation services to

clients as there may be such obligation in contracts. The promises to transfer the goods and provision of services are not separately identifiable, which is evidenced by the fact that the Company provides significant services of integrating the goods and services into a single deliverable for which the customer has contracted. For such sales arrangements, the Company recognizes revenue using input method, based on the relationship between actual costs incurred compared to the total estimated costs for the contract. Such method is adopted because the Company believes it best depicts the transfer of goods and services to the customer.

Oilfield Environmental Protection Service

35.The Company provides wastewater treatment products and related service to oilfield and chemical industry companies and generates revenue from special equipment, self-developed chemical products and supporting service, transfer. Revenue is recognized when contract obligations have been performed. For such sales arrangements, the Company recognizes revenue when products are delivered, on-site assistance services rendered, and acceptance reports are signed off by customers. Such method is adopted because the Company believes it best depicts the transfer of services to the customer.

36.The Company provides oily sludge disposal and treatment services to oilfield companies and generates revenue from treatment services of oily sludge. Revenue is recognized when contract obligations have been performed. For such sales arrangements, the Company recognizes revenue using output method, based on the percentage-of-completion method. Such method is adopted because the Company believes it best depicts the transfer of services to the customer.

Platform Outsourcing Services

37.The Company provides online platform development and maintenance services to gas stations in various provinces in China. The Company believes that customers receive and consume the economic benefits simultaneously as the Company fulfils its performance obligations and that the operation and maintenance services are continuous in nature, with customers receiving ongoing benefits throughout the service period. The Company invoices customers at the end of each month based on fixed service fees and classifies this portion of revenue as revenue recognized over time.

38.The Company also provides API (application programming interface) port export services and related maintenance services to business partners in various industries that may have transactions in the fueling scenario. As the Company does not create or enhance assets controlled by its customers during the provision of its services and its customers do not simultaneously receive and consume services, the Company recognizes revenue at a single point in time when the online transaction is completed. The Company’s services enable terminal users of various mobile applications operated by its customers or partners to complete refueling transactions in cash or online through various payment channels; when each transaction, including refueling and payment, is completed, the Company is entitled to charge, at pre-set rates, each transaction amount as a service fee and recognize the underlying amount as revenue. Related fees are generally billed monthly on a per-transaction basis.

Arrangements with Multiple Performance Obligations

39.Contracts with customers may include multiple performance obligations. For such arrangements, the Company will allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or using expected cost-plus margin.

Contract Balances

40.The Company’s contract balances include contract costs, net and contract liabilities from contracts with customers, and the following table provides information about contract balances:


	June 30,		December 31,		December 31,
	2024		2024		2024
				RMB		US Dollars
		RMB		(Unaudited)		(Unaudited)
Contract costs, net	¥	48,335,817	¥	41,628,922	$	5,703,139
Contract liabilities	¥	1,820,481	¥	4,098,136	$	561,442

41.

42.Contract Costs, Net - The Company recognizes an asset from the costs incurred to fulfill a contract when those costs meet all of the following criteria: (i) the costs relate directly to a contract or to an anticipated contract that the Company can specifically identify; (ii) the costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and (iii) the costs are expected to be recovered.

43.-Pre-Contract Costs - Pre-contract costs are the amounts prepaid to suppliers for purchases of customized equipment in anticipation of obtaining planned contracts for the Company’s hardware and software revenue. If it subsequently confirms that the Company is unable to secure the planned contracts with a customer after making the advance payments for these planned contracts, the Company evaluates the probable recoverability of the pre-contract cost and charges to expenses when the Company determines that the recovery of such pre-contract cost is improbable.

44.-Executed Contract Costs - Direct costs, such as material, labor, depreciation and amortization and subcontracting costs and indirect costs allocable to contracts include the costs of contract supervision, tools and equipment, supplies, quality control and inspection, insurance, repairs and maintenance for quality assurance purposes before clients’ initial acceptance. Once products are delivered, installed and debugged for intended use and accepted by a client, which may last from weeks to months (this process is decided by the client’s individual project construction arrangement), the Company records revenue based on the contract or the final clients’ acceptance. Minor costs for repair during the maintenance period after initial acceptance are recorded as cost of goods sold as they are incurred. All other general and administrative costs and selling costs are charged to expenses as incurred. The Company generally ships its products approximately one week to six months after production begins and the timing depends on the size of the overall project.

45.Contract Liabilities - Contract liabilities are recognized for contracts where payment has been received in advance of performance under the contract. The Company’s contract liabilities consist primarily of the Company’s unsatisfied performance obligations as of the balance sheet dates. Contract liabilities are recognized as revenue after control of the products or services is transferred to the customer and all revenue recognition criteria have been met. The amount of revenue recognized during the six months ended December 31, 2023 and 2024 that was previously included within contract liability balances was ¥1,689,759, and ¥263,824 ($36,144), respectively.

Performance Obligations

46.Performance obligations include delivery of products and provision of services. The Company recognizes revenue when performance obligations under the terms of a contract with its customer are satisfied. This occurs when the control of the goods and services have been transferred to the customer. Accordingly, revenue for sale of goods is generally recognized upon shipment or delivery depending on the shipping terms of the underlying contract, and revenue for provision of services is recognized upon the service rendered. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods and providing services.

47.Amounts billed to customers for shipping and handling activities to fulfill the Company’s promise to transfer the goods are included in revenue, and costs incurred by the Company for the delivery of goods are classified as cost of sales in the consolidated statements of operations and comprehensive income (loss). Sales, value added, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. The Company generally offers assurance-type warranties for its products. The specific terms and conditions of those warranties vary depending upon the product. The Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time product revenue is recognized. Factors that affect the warranty liability include historical product-failure experience and estimated repair costs for identified matters. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. The amount accrued for expected returns and warranty claims was immaterial as of December 31, 2024.

Practical Expedients Elected

48.Incremental Costs of Obtaining a Contract - The Company has elected the practical expedient permitted in ASC 340-40-25-4, which permits an entity to recognize incremental costs to obtain a contract as an expense when incurred if the amortization period will be less than one year and not significant.

49.Significant Financing Component - The Company has elected the practical expedient permitted in ASC 606-10-32-18, which allows an entity to not adjust the promised amount of consideration for the effects of a significant financing component if a contract has a duration of one year or less. As the Company’s contracts are majorly less than one year in length, consideration will not be adjusted. For the Company’s contracts include a standard payment term of 90 days to 180 days; consequently, there is no significant financing component within contracts. There are also some new contracts that will not be completed within one year from year 2024, the Company did calculation and the amount was not material as end of December 31, 2024.

Accounts Receivable, Net, Other Receivables, Net and Loan to Third Parties

50.Accounts receivable are carried at original invoiced amount less a provision for any potential uncollectible amounts. In July 2020, the Company adopted ASU 2016 13, Topics 326 Credit Loss, Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology, as its accounting standard for its accounts receivable and other receivables. Other receivables and loan to third parties arise from transactions with non-trade customers.

51.The adoption of the credit loss accounting standard has no material impact on the Company’s consolidated financial statements as of July 1, 2020. Accounts receivable, other receivables and loan to third parties are recognized and carried at carrying amount less an allowance for credit loss, if any. The Company maintains an allowance for credit losses resulting from the inability of its trade and non-trade customers (“customers”) to make required payments based on contractual terms. The Company reviews the collectability of its receivables on a regular and ongoing basis. The Company has also included in calculation of allowance for credit losses. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. The Company also considers external factors to the specific customer, including current conditions and forecasts of economic conditions. In the event the Company recovers amounts previously reserved for, the Company will reduce the specific allowance for credit losses.

52.The Company evaluates the creditworthiness of all of its customers individually before accepting them and continuously monitors the recoverability of accounts receivable, other receivables and loan to third parties. If there are any indicators that a customer may not make payment, the Company may consider making provision for non-collectability for that particular customer. At the same time, the Company may cease further sales or services to such customer. The following are some of the factors that the Company considers in determining whether to discontinue sales, record as contra revenue or allowance for credit losses:

●

the oil price and fluctuation of the overall oil industry;

●

the customer fails to comply with its payment schedule;

●

the customer is in serious financial difficulty;

●

a significant dispute with the customer has occurred regarding job progress or other matters;

●

the customer breaches any of the contractual obligations;

●

the customer appears to be financially distressed due to economic or legal factors;

●

the business between the customer and the Company is not active; and

●

other objective evidence indicates non-collectability of the accounts receivable, other receivables and loan to third parties.

53.The Company considers the following factors when determining whether to permit a longer payment period or provide other concessions to customers:

●

the customer’s past payment history;

●

the customer’s general risk profile, including factors such as the customer’s size, age, and public or private status;

●

macroeconomic conditions that may affect a customer’s ability to pay; and

●

the relative importance of the customer relationship to the Company’s business.

Share-Based Compensation

54.Share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight–line basis over the requisite service period for the entire award. The Company has elected to recognize compensation expenses using the valuation model estimated at the grant date based on the award’s fair value.

Warrants

55.The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own Class A Ordinary Shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

56.For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the consolidated statements of operations.

Results of Operations

57.The following consolidated results of operations include the results of operations of the Company and the Domestic Companies.

58.Our historical reporting results are not necessarily indicative of the results to be expected for any future period.

Six Months Ended December 31, 2024 Compared to Six Months Ended December 31, 2023

59.During the six months ended December 31, 2024, the Company’s core business demonstrated stability, with a modest increase, largely driven by the recovery in oilfield client production activity. In addition, the Company experienced some fluctuations in revenue and cost due to the fact that its qualifications for the production of oily sludge have not been renewed yet, and some new businesses developed last year encountered some temporary challenges.

Revenue


	For the Six Months Ended
	December 31,
					Increase /		Percentage
	2023		2024		(Decrease)		Change
Automation product and software	¥	17,552,892	¥	20,923,759	¥	3,370,867	19.2	%
Equipment and accessories		17,867,404		15,684,480		(2,182,924)	(12.2)	%
Oilfield environmental protection		8,053,696		2,721,894		(5,331,802)	(66.2)	%
Platform outsourcing services		1,782,680		2,739,137		956,457	53.7	%
Total revenue	¥	45,256,672	¥	42,069,270	¥	(3,187,402)	(7.0)	%

60.

61.Our total revenue for the six months ended December 31, 2024 were approximately ¥42.1 million ($5.8 million), a decrease of approximately ¥3.2 million ($0.4 million) or 7.0% from ¥45.3 million for the same period in 2023.

(1)

Revenue from automation product and software increased by ¥3.4 million ($0.5 million) or 19.2%. For the six months ended December 31, 2024, the increase in revenue from automation products and software is primarily due to the growing market demand for automated operations.

(2)

Revenue from equipment and accessories decreased by ¥2.2 million ($0.3 million) or 12.2%. For the six months ended December 31, 2024, revenues from the heating furnace category increased by ¥1.9 million compared to the same period

in 2023, driven by our oilfield customers’ expanded production capacity. Revenues from equipment used in the offshore oilfield category decreased by ¥3.3 million, primarily due to reduced demand from our customers. We anticipate an overall increase in revenues from offshore customers in 2025.

(3)

Revenue from oilfield environmental protection decreased by ¥5.3 million ($0.7 million) or 66.2% primarily due to the expiration of Gansu BHD’s hazardous waste operation permit during the six-month period ending December 31, 2024. As a result, no revenue was recorded. The company is currently engaged in the active application process for the renewal of relevant qualifications. Besides, some customers request and we agreed to a lower price for a portion of our wastewater business in order to establish a long-term relationship, resulting in a decrease in revenue from that portion of the business.

(4)

Revenue from platform outsourcing services increased by ¥1.0 million ($0.1 million) or 53.7%. The increase was mainly due to the rise in transaction volumes of diesel users and the higher settlement rates with freight trading platform clients.

Cost of revenue


	For the Six Months Ended
	December 31,
					Increase /		Percentage
	2023		2024		(Decrease)		Change
Automation product and software	¥	14,040,976	¥	12,381,024	¥	(1,659,952)	(11.8)	%
Equipment and accessories		12,778,042		11,151,894		(1,626,148)	(12.7)	%
Oilfield environmental protection		6,020,271		4,852,390		(1,167,881)	(19.4)	%
Platform outsourcing services		311,641		329,160		17,519	5.6	%
Total cost of revenue	¥	33,150,930	¥	28,714,468	¥	(4,436,462)	(13.4)	%

62.

63.Our total cost of revenue decreased from ¥33.2 million ($4.5 million) for the six months ended December 31, 2023 to ¥28.7 million ($3.9 million) for the same period in 2024.

(1)

For the six months ended December 31, 2023 and 2024, cost of revenue from automation product and software was approximately ¥14.0 million and ¥12.4 million ($1.7 million), respectively, representing a decrease of approximately ¥1.6 million ($0.2 million) or 11.8%. The decrease in cost of revenue from automation product and software was primarily attributable to the proportion of operation and maintenance services, which have lower costs.

(2)

For the six months ended December 31, 2023 and 2024, cost of revenue from equipment and accessories was approximately ¥12.8 million and ¥11.2 million ($1.5 million), respectively, representing a decrease of approximately ¥1.6 million ($0.2 million) or 12.7%. The costs of the furnace business increased in this period due to the corresponding increase in revenue, whereas the costs of the offshore oilfield customers decreased in line with the decreased revenue, resulting in a reduced total cost of sales.

(3)

For the six months ended December 31, 2023 and 2024, cost of revenue from oilfield environmental protection was approximately ¥6.0 million and ¥4.9 million ($0.7 million), respectively, representing a decrease of approximately ¥1.1 million ($0.2 million) or 19.4%. The decrease in the cost of revenue from oilfield environmental protection was in line with decrease in revenue.

(4)

For the six months ended December 31, 2023 and 2024, cost of revenue from platform outsourcing services remained stable at ¥0.3 million ($0.05 million).

Gross Profit


	For the Six Months Ended
	December 31,
	2023				2024
	Gross				Gross				Increase /		Percentage
	Profit		Margin %		Profit		Margin %		(Decrease)		Change
Automation product and software	¥	3,511,916	20.0	%	¥	8,542,735	40.8	%	¥	5,030,819	143.2	%
Equipment and accessories		5,089,362	28.5	%		4,532,586	28.9	%		(556,776)	(10.9)	%
Oilfield environmental protection		2,033,425	25.2	%		(2,130,496)	(78.3)	%		(4,163,921)	(204.8)	%
Platform outsourcing services		1,471,039	82.5	%		2,409,977	88.0	%		938,938	63.8	%
Total gross profit and margin %	¥	12,105,742	26.7	%	¥	13,354,802	31.7	%	¥	1,249,060	10.3	%

64.

65.Our total gross profit increased to ¥13.4 million ($1.8 million) for the six months ended December 31,2024 from ¥12.1 million for the same period in 2023. Our gross profit as a percentage of revenue increased to 31.7% for the six months ended December 31, 2024 from 26.7% for the same period in 2023.

(1)

For the six months ended December 31, 2023 and 2024, our gross profit from automation product and software was approximately ¥3.5 million and ¥8.5 million ($1.2 million), respectively, representing an increase in gross profit of approximately ¥5.0 million ($0.7 million) or 143.2%. The increase in gross margin was primarily due to the elevated proportion of high-margin service businesses.

(2)

For the six months ended December 31, 2023 and 2024, gross profit from equipment and accessories was approximately ¥5.1 million and ¥4.5 million ($0.6 million), respectively, representing a decrease of approximately ¥0.6 million ($0.1 million) or 10.9 %. The gross margin for automation equipment and accessories has remained relatively stable in this period.

(3)

For the six months ended December 31, 2023 and 2024, gross profit from oilfield environmental protection was approximately ¥2.0 million and negative ¥2.1 million (negative $0.3 million), respectively, representing a decrease of ¥4.1 million ($0.6 million), or 204.8%. The main reason for the decrease in gross margin is that one of our customers reduced the settlement price.

(4)

For the six months ended December 31, 2023 and 2024, gross profit from platform outsourcing services was approximately ¥1.5 million and ¥2.4 million ($0.3 million), respectively, representing an increase of approximately ¥0.9 million ($0.1 million), or 63.8%, primarily due to the increase in the settlement rate.

Operating Expenses


	For the Six Months Ended
	December 31,
							Increase /			Percentage
	2023			2024			(Decrease)			Change
Selling and distribution expenses	¥	4,547,115		¥	5,177,944		¥	630,829		13.9	%
% of revenue		10.0	%		12.3	%		2.3	%	—
General and administrative expenses		22,042,042			24,038,744			1,996,702		9.1	%
% of revenue		48.7	%		57.1	%		8.4	%	—
Allowance for credit losses		1,553,364			870,714			(682,650)		(43.9)	%
% of revenue		3.4	%		2.1	%		(1.3)	%	—
Research and development expenses		6,765,287			10,167,182			3,401,895		50.3	%
% of revenue		14.9	%		24.2	%		9.3	%	—
Operating expenses	¥	34,907,808		¥	40,254,584		¥	5,346,776		15.3	%

66.

67.Selling and Distribution Expenses. Selling and distribution expenses consist primarily of salaries and related expenditures of the Company’s sales and marketing departments, sales commissions, costs of marketing programs including traveling expenses, advertising and trade shows, and rental expense, as well as shipping charges. Selling expenses increased by 13.9 %, or ¥0.7 million ($0.1 million), from ¥4.6 million for the six months ended December 31, 2023 to ¥5.2 million ($0.6 million) in the same period of 2024. The increase was mainly attributable to the increased bidding expense and travelling expenses due to an increase in sales activities of automation product and software. Selling expenses were 12.3% of total revenue for the six months ended December 31, 2024 and 10.0% of total revenue for the same period of 2023.

68.General and Administrative Expenses. General and administrative expenses consist primarily of costs in human resources, facilities costs, depreciation expenses, professional advisor fees, audit fees, share-based compensation expense and other miscellaneous expenses incurred in connection with general operations. General and administrative expenses increased by 9.1%, or ¥2.0 million ($0.3 million), from ¥22.0 million for the six months ended December 31, 2023 to ¥24.0 million ($3.3 million) in the same period of 2024. The increase was primarily due to the increase of share-based compensation expenses and rent expenses, which was partially offset by the decreased consulting fee, audit fee and service fee during the six months ended December 31, 2024. General and administrative expenses accounted for 57.1% of total revenue for the six months ended December 31, 2024 and 48.7% of total revenue for the same period of 2023.

69.Allowance for credit losses. Allowance for credit losses is the estimated amount of bad debt that will arise as a result of lower collectability from account receivables, other receivables, purchase advances and contract assets. We recorded allowance for credit losses of ¥1.6 million for the six months ended December 31, 2023 as compared to allowance for credit losses of ¥0.9 million ($0.1 million) for the same period in 2024. The decrease of allowance for credit losses was due to the transfer of contract costs with longer aging to cost in this period. Management plans to continue to monitor and maintain the provision at a lower risk level.

70.Research and development (“R&D”) expenses. R&D expenses consist primarily of salaries and related expenditures for research and development projects. R&D expenses increase by 50.3%, or ¥3.4 million ($0.5 million) from ¥6.8 million for the six months ended December 31, 2023 to ¥10.2 million ($1.4 million) for the same period of 2024. R&D expenses accounted for 24.2% of total revenue in the six months ended December 31, 2024 and 14.9% of total revenue for the same period of 2023.

Net Loss


	For the Six Months Ended
	December 31,
					Increase /		Percentage
	2023		2024		(Decrease)		Change
Loss from operations	¥	(22,802,066)	¥	(26,899,782)	¥	(4,097,716)	18.0	%
Change in fair value of warrant liability		(1,941,195)		(10,327)		1,930,868	(99.5)	%
Interest income		10,377,351		6,555,282		(3,822,069)	(36.8)	%
Other expenses, net		(8,645,900)		(373,163)		8,272,737	(95.7)	%
Loss before income taxes		(23,011,810)		(20,727,990)		2,283,820	(9.9)	%
Income tax expenses		96,041		1,609		(94,432)	(98.3)	%
Net loss		(23,107,851)		(20,729,599)		2,378,252	(10.3)	%
Less: Net loss attributable to non-controlling interest		(553,829)		(141,270)		412,559	(74.5)	%
Net loss attributable to Recon Technology, Ltd	¥	(22,554,022)	¥	(20,588,329)	¥	1,965,693	(8.7)	%

71.

72.Loss from operations. Loss from operations was ¥26.9 million ($3.7 million) for the six months ended December 31, 2024, compared to a loss of ¥22.8 million for the same period of 2023. The ¥4.1 million ($0.6 million) increase in operating losses was mainly driven by higher operating expenses, as previously discussed.

73.Change in fair value of warrant liability. The Company classified the warrants issued in connection with common share offering as liabilities at their fair value and adjusted the warrant instrument to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. Loss in fair value changes of warrant liability was ¥1.9 million and ¥0.01 million ($0.001 million) for the six months ended December 31, 2023 and 2024, respectively. The primary reason for the decrease of loss in the fair value of the warrant liability was that on December 14, 2023, we redeemed an aggregate of 17,953,269 warrants (equivalent to 997,404 warrants post the 2024 Reverse Split) from the Sellers.

74.Interest income, net. Net interest income was ¥6.6 million ($0.9 million) for the six months ended December 31, 2024, compared to net interest income of ¥10.4 million for the same period of 2023. The ¥3.8 million ($0.5 million) decrease in net interest income was primarily due to the collection of loans to third parties and coupled with a reduction in interest rates for new loans.

75.Other expenses, net. Other net expenses was ¥0.4 million ($0.1 million) for the six months ended December 31, 2024, compared to other net expenses of ¥8.6 million for the same period of 2023, the ¥8.2 million ($1.1 million) decrease in other net expenses was primarily due to a decrease of ¥0.1 million ($0.02 million) in subsidy income and a decrease in other expenses of ¥8.5 million ($1.2 million) which was partially offset by an increase loss from foreign currency of ¥0.2 million ($0.03 million). The decrease in other expenses, as we accrued ¥8.5 million ($1.2 million) estimated liability based on the potential for future significant transaction compensation in contracts to repurchase investor warrants during the six months ended December 31, 2023. For the six months ended December 31, 2024, we do not have this situation.

76.Net loss. As a result of the factors described above, net loss was ¥20.7 million ($2.8 million) for the six months ended December 31, 2024, a decrease of ¥2.4 million ($0.3 million) from net loss of ¥23.1 million for the same period of 2023.

Liquidity and Capital Resources

77.As of December 31, 2024, we had cash in the amount of approximately ¥145.3 million ($19.9 million). As of June 30, 2024, we had cash in the amount of approximately ¥110.0 million.

78.Indebtedness. As of December 31, 2024, we had ¥0.02 million ($0.002 million) of warrant liability, ¥11.6 million ($1.6 million) of short-term bank loans, ¥10.0 million ($1.4 million) of short-term borrowings and 10.0 million ($1.4 million) of long-term borrowings from a related party, ¥2.1 million ($0.3 million) of short-term lease payable and ¥2.7 million ($0.4 million) of long-term lease payable due to third parties, ¥1.8 million ($0.3 million) of short-term lease payable and ¥0.1 million ($0.02 million) of long-term lease payable due to related parties, ¥27.3 million ($3.7 million) of contractual purchase commitments, and a liability of severance payments of ¥9.0 million ($1.2 million) which is very unlikely to be incurred in the foreseeable future other than indebtedness listed above, we did not have any other finance leases, guarantees or other material contingent liabilities.

79.Holding Company Structure. We are a holding company with no operations of our own. All of our operations are conducted through the Domestic Companies. As a result, our ability to pay dividends and to finance any debt that we may incur is dependent upon the receipt of dividends and other distributions from the Domestic Companies. In addition, Chinese legal restrictions permit payment of dividends to us by the Domestic Companies only out of their respective accumulated net profits, if any, determined in accordance with Chinese accounting standards and regulations. Under Chinese law, the Domestic Companies are required to set aside a portion (at least 10%) of their after-tax net income (after discharging all cumulated loss), if any, each year for compulsory statutory reserve until the amount of the reserve reaches 50% of the Domestic Companies’ registered capital. These funds may be distributed to shareholders at the time of each Domestic Company’s wind-up.

80.Off-Balance Sheet Arrangements. We have not entered into any financial guarantees or other commitments 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 interest 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, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

81.Capital Resources. To date we have financed our operations primarily through cash flows from financing activities. As of December 31, 2024, we had total assets of ¥541.7 million ($74.2 million), which includes cash of ¥145.3 million ($19.9 million), net accounts receivable of ¥40.4 million ($5.5 million), loans to third parties of ¥250.5 million ($34.3 million) and net contract costs of ¥41.6 million ($5.7 million). Working capital amounted to ¥427.1 million ($58.5 million). Shareholders’ equity amounted to ¥488.5 million ($66.9 million).

82.Cash from Operating Activities. Net cash used in operating activities was ¥12.7 million ($1.7 million) for the six months ended December 31, 2024. This was an increase of approximately ¥6.1 million ($0.8 million) compared to net cash used in operating activities of approximately ¥6.6 million for the same period in 2023. The net cash used in operating activities for the six months ended December 31, 2024 was primarily attributable to the net loss attributable to the Company in the amount of ¥20.7 million ($2.8 million) due to the reasons discussed above, reconciled by a decrease in contract costs of ¥8.1 million ($1.1 million), an increase in trade accounts payable of ¥3.9 million ($0.5 million) and an increase in advances from customers of ¥2.3 million ($0.3 million).

83.Cash from Investing Activities. Net cash from investing activities was approximately ¥49.1 million ($6.7 million) for the six months ended December 31, 2024. This was a decrease of approximately ¥12.5 million ($1.7 million) compared to net cash used in investing activities of approximately ¥61.6 million for the same period in 2023, which was due to the redemption of short-term investments, which partially offset by payments made for loan to third parties.

84.Cash from Financing Activities. Net cash used in financing activities amounted to ¥1.6 million ($0.2 million) for the six months ended December 31, 2024, as compared to net cash used in financing activities of ¥32.0 million for the same period in 2023. The decrease in net cash used in financing activities was mainly due to the redemption of warrants during the six months ended December 31, 2023.

85.Working Capital. Total working capital as of December 31, 2024 amounted to ¥427.1 million ($58.5 million), compared to ¥459.0 million as of June 30, 2024. Total current assets as of December 31, 2024 amounted to ¥479.2 million ($65.6 million), a decrease of ¥27.3 million ($3.7 million) compared to approximately ¥506.5 million at June 30, 2024. The decrease in total current assets at December 31, 2024 compared to June 30, 2024 was mainly due to a decrease in short-term investments, partially offset by a increase in cash and loans to third parties. For the six months ended December 31, 2024, the Company had approximately ¥12.7 million ($1.7 million) cash out flow from the operating activities, and as of December 31, 2024, our total future minimum purchase commitment under the non-cancellable purchase contracts were amounted to ¥27.3 million ($3.7 million). As of December 31, 2024, the Company had cash in the amount of approximately ¥145.3 million ($19.9 million) for the next operating cycle ending December 31, 2025. Based on the historical trends and the capital requirements of the new plant we are constructing, management believes that the Company will have sufficient working capital for its operations at least 12 months from the issuance date of this report.

86.Current liabilities. Current liabilities amounted to ¥52.1 million ($7.1 million) at December 31, 2024, in comparison to ¥47.5 million at June 30, 2024.

87.Capital Needs. With the uncertainty of the current market, our management believes it is necessary to enhance collection of outstanding accounts receivable and other receivables, and to be cautious on operational decisions and project selection. Our management believes that our current operations can satisfy our daily working capital needs. We may also raise capital through public offerings or private placements of our securities to finance our development of our business and to consummate any merger and acquisition, if necessary.

Tabular Disclosure of Contractual Obligations

88.Below is a table setting forth all our contractual obligations as of December 31, 2024, which consists of our short-term loan agreements, operating lease obligations, loans from third parties, warrant liabilities and due to related party:


	Payment Due by Period
			Less						More
			than		1 – 3		3 – 5		than
Contractual Obligations	Total		1 year		years		years		5 years
Short-term debt obligations	¥	31,600,844	¥	21,600,844	¥	10,000,000	¥	—	¥	—
Operating lease obligations		6,851,299		4,016,688		2,834,611		—		—
Due to related parties		1,787,315		1,787,315		—		—		—
Purchase obligation		27,265,303		27,265,303		—		—		—
Warrant liabilities		17,504		—		17,504		—		—
Total	¥	67,522,265	¥	54,670,150	¥	12,852,115	¥	—	¥	—

89.

Select Condensed Financial Statements on Consolidated VIEs

90.The following table below provides a condensed consolidating schedule depicting the financial position, cash flows, and results of operations for the parent, the consolidated VIEs, and any eliminating adjustments separately as of the same dates and for the same periods for which audited consolidated financial statements are required.

SELECTED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS


	For the Six Months Ended December 31, 2024
	Recon
	Technology,
	Ltd.
	(Cayman		“Non-VIE Subsidiaries		VIEs and VIE’s				Consolidated
	Islands)		(Hong Kong and PRC)”		subsidiaries (PRC)		Eliminations		Total
Revenue	¥	—	¥	—	¥	42,069,270	¥	—	¥	42,069,270
Cost of Revenue		—		—		28,714,468		—		28,714,468
Gross Profit		—		—		13,354,802		—		13,354,802
Operating expenses		11,962,691		2,128,779		26,163,114		—		40,254,584
Loss from operations		(11,962,691)		(2,128,779)		(12,808,312)		—		(26,899,782)
Other income (expenses), net		5,836,235		10,560		324,997		—		6,171,792
Loss from subsidiaries		—		(12,343,654)		—		12,343,654		—
Loss from VIEs		(14,461,873)		—		—		14,461,873		—
Income tax expenses		—		—		1,609		—		1,609
Net loss		(20,588,329)		(14,461,873)		(12,484,924)		26,805,527		(20,729,599)
Non-controlling interest		—		—		(141,270)		—		(141,270)
Net Loss Attributable to Recon Technology, Ltd	¥	(20,588,329)	¥	(14,461,873)	¥	(12,343,654)	¥	26,805,527	¥	(20,588,329)

91.

SELECTED CONDENSED CONSOLIDATING BALANCE SHEETS


	For the Six Months Ended December 31, 2024
	Recon
	Technology,
	Ltd.
	(Cayman		Non-VIE Subsidiaries		VIEs and VIE’s				Consolidated
	Islands)		(Hong Kong and PRC)		subsidiaries (PRC)		Eliminations		Total
Cash and cash equivalents	¥	74,929,137	¥	46,486,909	¥	23,868,345	¥	—	¥	145,284,391
Restricted cash		—		—		8,123		—		8,123
Short-term investments		—		—		—		—		—
Other current assets		198,920,232		23,055,209		111,927,144		—		333,902,585
Intercompany receivables		377,505,218		157,079,860		—		(534,585,078)		—
Total current assets		651,354,587		226,621,978		135,803,612		(534,585,078)		479,195,099
Investments in subsidiaries and VIEs		(161,500,924)		—		—		161,500,924		—
Benefits through VIEs and VIE’s subsidiaries		—		(143,155,175)		—		143,155,175		—
Other non-current assets		—		15,819,340		46,699,593		—		62,518,933
Total non-current assets		(161,500,924)		(127,335,835)		46,699,593		304,656,099		62,518,933
Total Assets		489,853,663		99,286,143		182,503,205		(229,928,979)		541,714,032
Intercompany payables		—		265,189,953		269,395,125		(534,585,078)		—
Other liabilities and accrued liabilities		1,316,803		356,114		63,266,165		—		64,939,082
Total Liabilities		1,316,803		265,546,067		332,661,290		(534,585,078)		64,939,082
Class A ordinary shares, $0.0001 U.S. dollar par value, 500,000,000 shares authorized; 7,987,959 shares and 7,987,959 shares issued and outstanding as of June 30, 2024 and December 31, 2024, respectively*		99,634		—		—		—		99,634
Class B ordinary shares, $0.0001 U.S. dollar par value, 80,000,000 shares authorized; 7,100,000 shares and 20,000,000 shares issued and outstanding as of June 30, 2024 and December 31, 2024, respectively*		14,038		—		—		—		14,038
Additional paid-in capital		686,830,523		—		4,759,000		(4,759,000)		686,830,523
Retained earnings		(236,751,485)		(140,429,122)		(125,332,930)		265,762,052		(236,751,485)
Accumulated other comprehensive income		38,344,150		(25,830,802)		(17,822,245)		43,653,047		38,344,150
Total Shareholders’ Equity		488,536,860		(166,259,924)		(138,396,175)		304,656,099		488,536,860
Non-controlling interests		—		—		(11,761,910)		—		(11,761,910)
Total Liabilities and Equity	¥	489,853,663	¥	99,286,143	¥	182,503,205	¥	(229,928,979)	¥	541,714,032

92.

SELECTED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS


	For the Six Months Ended December 31, 2024
	Recon
	Technology,
	Ltd.		Subsidiaries
	(Cayman		(Hong Kong					Consolidated
	Islands)		and PRC)		VIE (PRC)		Eliminations	Total
Net cash used in operating activities	¥	(7,257,204)	¥	(6,836,997)	¥	1,427,421	—	¥	(12,666,780)
Net cash provided by (used in) investing activities		65,225,968		(5,924,963)		(11,963,938)	1,768,224		49,105,291
Net cash provided by financing activities		(810,082)		1,796,283		(861,546)	(1,768,224)		(1,643,569)
Effect of exchange rate fluctuation on cash and cash equivalents		1,297,437		(708,536)		(931,939)	—		(343,038)
Net change in cash		58,456,119		(11,674,213)		(12,330,002)	—		34,451,904
Opening cash balance		16,473,018		58,161,122		36,206,470	—		110,840,610
Restricted cash		—		—		8,123	—		8,123
Ending cash balance	¥	74,929,137	¥	46,486,909	¥	23,868,345	—	¥	145,284,391

Exhibit 99.3

Recon Technology, Ltd Reports Financial Results for the First Six Months of Fiscal Year 2025

BEIJING, March 31, 2025 /PRNewswire/ -- Recon Technology, Ltd (NASDAQ: RCON) (“Recon” or the “Company”), a China-based independent solutions integrator in the oilfield service and environmental protection, electric power and coal chemical industries, today announced its financial results for the first six months of fiscal year 2025.

First Six Months of Fiscal 2025 Financial Highlights:

Total revenue decreased to RMB42.1 million ($5.8 million) for the six months ended December 31, 2024, from RMB45.3 million ($6.2 million) for the same period in 2023.

Gross profit increased to RMB13.4 million ($1.8 million) for the six months ended December 31, 2024, from RMB12.1 million ($1.7 million) for the same period in 2023.

Gross margin increased to 31.7% for the six months ended December 31, 2024 from 26.7% for the same period in 2023.

Net loss was RMB20.7 million ($2.8 million) for the six months ended December 31, 2024, a decrease of RMB2.4 million ($0.3 million) from net loss of RMB23.1 million ($3.2 million) for the same period of 2023.


	For the Six Months Ended
	December 31,
(in RMB millions, except earnings per share; differences due to rounding)	2024			2023			Increase /(Decrease)			Percentage Change
Revenue	RMB	42.1		RMB	45.3		RMB	(3.2)		(7.0)	%
Gross profit		13.4			12.1			1.3		10.3	%
Gross margin		31.7	%		26.7	%		18.7	%	—
Net loss		(20.7)			(23.1)			(2.4)		(10.3)	%
Net loss per share – Basic and diluted		(2.29)			(8.27)			5.98		(72.3)	%

Management Commentary

Mr. Shenping Yin, Founder and CEO of Recon, said, “For the six months ended December 31, 2024, our oilfield customers' production continued to increase, and demand for our automation and oilfield specialized equipment also increased, with corresponding revenue and gross profit both rising and improving. However, our revenue as a whole declined slightly due to fluctuations in demand from some of our new businesses and customers. We anticipate a steady rebound in our business and operating quality, particularly in our two core segments: digital solutions and oilfield environmental protection. As China's oil service companies are in a stage of development driven by customers' rising demand for stable production and supply and technology upgrades, we will continue to increase our investment in technology and continue to improve our long-term corporate competitiveness. In addition, our ongoing project to build a chemical recycling plant for low-value plastics made a significant breakthrough during the period. We have successfully obtained the necessary qualifications for the production and commencement of construction of the plant, which is scheduled to begin in April 2025 and enter the formal production phase in the second half of 2025.”

First Six Months Fiscal 2025 Financial Results:

Revenue

Total revenues for the six months ended December 31, 2024 were approximately RMB42.1 million ($5.8 million), a decrease of approximately RMB3.2 million ($0.4 million) or 7.0% from RMB45.3 million ($6.2 million) for the same period in 2023.

Revenue from automation product and software increased by RMB3.4 million ($0.5 million) or 19.2%. For the six months ended December 31, 2024, the increase in revenue from automation products and software is primarily due to the growing market demand for automated operations.

Revenue from equipment and accessories decreased by RMB2.2 million ($0.3 million) or 12.2%. For the six months ended December 31, 2024, revenues from the heating furnace category increased by RMB1.9 million compared to the same period in 2023, driven by our oilfield customers’ expanded production capacity. Revenues from equipment used in the offshore oilfield category decreased by RMB3.3 million, primarily due to reduced demand from our customers. We anticipate an overall increase in revenues from offshore customers in 2025.

Revenue from oilfield environmental protection decreased by RMB5.3 million ($0.7 million) or 66.2%, primarily due to the expiration of Gansu BHD's hazardous waste operation permit during the six-month period ending December 31, 2024. As a result, no revenue was recorded. The company is currently engaged in the active application process for the renewal of relevant qualifications. Besides, some customers request and we agreed to a lower price for a portion of our wastewater business in order to establish a long-term relationship, resulting in a decrease in revenue from that portion of the business.

Revenue from platform outsourcing services increased by RMB1.0 million ($0.1 million) or 53.7%. The increase was mainly due to the rise in transaction volumes of diesel users and the higher settlement rates with freight trading platforms clients.

Cost of revenue

Cost of revenues decreased from RMB33.2 million ($4.5 million) for the six months ended December 31, 2023 to RMB 28.7 million ($3.9 million) for the same period in 2024.

For the six months ended December 31, 2023 and 2024, cost of revenue from automation product and software was approximately RMB14.0 million and RMB12.4 million ($1.7 million), respectively, representing a decrease of approximately RMB1.6 million ($0.2 million) or 11.8%. The decrease in cost of revenue from automation product and software was primarily attributable to the proportion of operation and maintenance services, which have lower costs.

For the six months ended December 31, 2023 and 2024, cost of revenue from equipment and accessories was approximately RMB12.8 million and RMB11.2 million ($1.5 million), respectively, representing a decrease of approximately RMB1.6 million ($0.2 million) or 12.7%. The costs of the furnace business increased in this period due to the corresponding increase in revenue, whereas the costs of the offshore oilfield customers decreased in line with the decreased revenue, resulting in a reduced total cost of sales.

For the six months ended December 31,2023 and 2024, cost of revenue from oilfield environmental protection was approximately RMB6.0 million and RMB4.9 million ($0.7 million), respectively, representing a decrease of approximately RMB1.1 million ($0.2 million) or 19.4%. The decrease in the cost of revenue from oilfield environmental protection was in line with decrease in revenue.

For the six months ended December 31,2023 and 2024, cost of revenue from platform outsourcing services remained stable at RMB0.3 million ($0.05 million).

Gross profit

Gross profit increased to RMB13.4 million ($1.8 million) for the six months ended December 31,2024 from RMB12.1 million ($1.7 million) for the same period in 2023. Our gross profit as a percentage of revenue increased to 31.7% for the six months ended December 31, 2024 from 26.7% for the same period in 2023.

For the six months ended December 31, 2023 and 2024, our gross profit from automation product and software was approximately RMB3.5 million and RMB8.5 million ($1.2 million), respectively, representing an increase in gross profit of approximately RMB5.0 million ($0.7 million) or 143.2%. The increase in gross margin was primarily due to the elevated proportion of high-margin service businesses.

For the six months ended December 31, 2023 and 2024, gross profit from equipment and accessories was approximately RMB5.1 million and RMB4.5 million ($0.6 million), respectively, representing a decrease of approximately RMB0.6 million ($0.1 million) or 10.9 %. The gross margin for equipment and accessories has remained relatively stable in this period.

For the six months ended December 31, 2023 and 2024, gross profit from oilfield environmental protection was approximately RMB2.0 million and negative RMB2.1 million (negative $0.3 million), respectively, representing a decrease of RMB4.1 million ($0.6 million), or 204.8%. The main reason for the decrease in gross margin is that one of our customers reduced the settlement price.

For the six months ended December 31, 2023 and 2024, gross profit from platform outsourcing services was approximately RMB1.5 million and RMB2.4 million ($0.3 million), respectively, representing an increase of approximately RMB0.9 million ($0.1 million), or 63.8%, primarily due to the increase in the settlement rate.

Operating expenses

Selling expenses increased by 13.9%, or RMB0.7 million ($0.1 million), from RMB4.6 million for the six months ended December 31, 2023 to RMB5.2 million ($0.6 million) in the same period of 2024.

General and administrative expenses increased by 9.1%, or RMB2.0 million ($0.3 million), from RMB22.0 million for the six months ended December 31, 2023 to RMB24.0 million ($3.3 million) in the same period of 2024.

The Company also recorded allowance for credit losses of RMB1.6 million for the six months ended December 31, 2023 as compared to allowance for credit losses of RMB0.9 million ($0.1 million) for the same period in 2024.

Research and development expenses increased by 50.3%, or RMB3.4 million ($0.5 million) from RMB6.8 million for the six months ended December 31, 2023 to RMB10.2 million ($1.4 million) for the same period of 2024.

Loss from operations

Loss from operations was RMB26.9 million ($3.7 million) for the six months ended December 31, 2024, compared to a loss of RMB22.8 million for the same period of 2023. This RMB4.1 million ($0.6 million) increase in operating losses was mainly driven by higher operating expenses, as previously discussed.

Change in fair value of warrant liability

The Company classified the warrants issued in connection with common share offering as liabilities at their fair value and adjusted the warrant instrument to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. Loss in fair value changes of warrant liability was RMB1.9 million and RMB0.01 million ($0.001 million) for the six months ended December 31, 2023 and 2024, respectively. The primary reason for the decrease of loss in the fair value of the warrant liability was that on December 14, 2023, we redeemed an aggregate of 17,953,269 warrants (equivalent to 997,404 warrants post the 2024 Reverse Split) from the Sellers.

Interest income

Net interest income was RMB6.6 million ($0.9 million) for the six months ended December 31, 2024, compared to net interest income of RMB10.4 million for the same period of 2023. The RMB3.8 million ($0.5 million) decrease in net interest income was primarily due to the collection of loans to third parties and coupled with a reduction in interest rates for new loans.

Other income (expenses), net.

Other net expenses was RMB0.4 million ($0.1 million) for the six months ended December 31, 2024, compared to other net expenses of RMB8.6 million for the same period of 2023, the RMB8.2 million ($1.1 million) decrease in other net expenses was primarily due to a decrease of RMB0.1 million ($0.02 million) in subsidy income and a decrease in other expenses of RMB8.5 million ($1.2 million) which was partially offset by an increase loss from foreign currency of RMB0.2 million ($0.03 million). The decrease in other expenses, as we accrued RMB8.5 million ($1.2 million) estimated liability based on the potential for future significant transaction compensation in contracts to repurchase investor warrants during the six months ended December 31, 2023. For the six months ended December 31, 2024, we do not have this situation.

Net loss

As a result of the factors described above, net loss was RMB20.7 million ($2.8 million) for the six months ended December 31, 2024, a decrease of RMB2.4 million ($0.3 million) from net loss of RMB23.1 million for the same period of 2023.

Cash and short-term investment

As of June 30, 2024, we had cash in the amount of approximately RMB110.0 million ($15.1 million) and short-term investment in bank fixed income product of approximately RMB88.1 million ($12.1 million). As of December 31, 2024, we had cash in the amount of approximately RMB145.3 million ($19.9 million) and short-term investment in bank fixed income product of approximately nil.

About Recon Technology, Ltd (“RCON”)

Recon Technology, Ltd (NASDAQ: RCON) is the People’s Republic of China’s first NASDAQ-listed non-state owned oil and gas field service company. Recon supplies China’s largest oil exploration companies, Sinopec (NYSE: SNP) and The China National Petroleum Corporation (“CNPC”), with advanced automated technologies, efficient gathering and transportation equipment and reservoir stimulation measure for increasing petroleum extraction levels, reducing impurities and lowering production costs. Through the years, RCON has taken leading positions within several segmented markets of the oil and gas filed service industry. RCON also has developed stable long-term cooperation relationship with its major clients. For additional information please visit: http://www.recon.cn/.

Forward-Looking Statements

Recon includes “forward-looking statements” within the meaning of the federal securities laws throughout this press release. A reader can identify forward-looking statements because they are not limited to historical fact or they use words such as “scheduled,” “may,” “will,” “could,” “should,” “would,” “expect,” “believe,” “anticipate,” “project,” “plan,” “estimate,” “forecast,” “goal,” “objective,” “committed,” “intend,” “continue,” or “will likely result,” and similar expressions that concern Recon’s strategy, plans, intentions or beliefs about future occurrences or results. Forward-looking statements are subject to risks, uncertainties and other factors that may change at any time and may cause actual results to differ materially from those that Recon expected. Many of these statements are derived from Recon’s operating budgets and forecasts, which are based on many detailed assumptions that Recon believes are reasonable, or are based on various assumptions about certain plans, activities or events which we expect will or may occur in the future. However, it is very difficult to predict the effect of known factors, and Recon cannot anticipate all factors that could affect actual results that may be important to an investor. All forward-looking information should be evaluated in the context of these risks, uncertainties and other factors, including those factors disclosed under “Risk Factors” in Recon’s most recent Annual Report on Form 20-F and any subsequent half-year financial filings on Form 6-K filed with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by the cautionary statements that Recon makes from time to time in its SEC filings and public communications. Recon cannot assure the reader that it will realize the results or developments Recon anticipates, or, even if substantially realized, that they will result in the consequences or affect Recon or its operations in the way Recon expects. Forward-looking statements speak only as of the date made. Recon undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances arising after the date on which they were made, except as otherwise required by law. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, Recon.

For more information, please contact:

The Company

Ms. Liu Jia

Chief Financial Officer

Recon Technology, Ltd

Phone: +86 (10) 8494-5799

Email: info@recon.cn

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(UNAUDITED)

	As of June 30,		As of December 31,		As of December 31,
	2024		2024		2024
	RMB		RMB		US Dollars
ASSETS
Current assets
Cash	¥	109,991,674	¥	145,284,391	$	19,903,880
Restricted cash		848,936		8,123		1,113
Short-term investments		88,091,794		—		—
Notes receivable		1,341,820		3,206,733		439,321
Accounts receivable, net		38,631,762		40,366,074		5,530,129
Inventories, net		1,128,912		1,541,020		211,119
Other receivables, net		3,352,052		3,934,865		539,074
Other receivables - related parties		275,976		279,976		38,357
Loans to third parties		208,928,370		231,952,064		31,777,302
Purchase advances, net		5,156,550		9,485,972		1,299,573
Contract costs, net		48,335,817		41,628,922		5,703,139
Prepaid expenses		401,586		696,877		95,471
Deferred offering cost		—		810,082		110,981
Total current assets		506,485,249		479,195,099		65,649,459

Property and equipment, net		22,137,940		20,859,877		2,857,791
Construction in progress		219,132		1,144,095		156,740
Long-term loan to third parties		—		18,500,000		2,534,490
Operating lease right-of-use assets, net (including ¥1,769,840 and ¥1,269,146 ($173,872) from related parties as of June 30, 2024 and December 31, 2024, respectively)		23,547,193		22,014,961		3,016,037
Total Assets	¥	552,389,514	¥	541,714,032	$	74,214,517

LIABILITIES AND EQUITY

Current liabilities
Short-term bank loans	¥	12,425,959	¥	11,582,636	$	1,586,815
Accounts payable		10,187,518		14,100,871		1,931,811
Other payables		2,769,685		1,559,371		213,633
Other payable- related parties		2,299,069		1,787,315		244,861
Contract liabilities		1,820,481		4,098,136		561,442
Accrued payroll and employees’ welfare		3,237,164		3,416,373		468,041
Taxes payable		993,365		1,685,496		230,912
Short-term borrowings - related parties		10,002,875		10,018,208		1,372,489
Operating lease liabilities - current (including ¥1,775,114 and ¥1,832,236 ($251,015) from related parties as of June 30, 2024 and December 31, 2024, respectively)		3,741,247		3,891,976		533,198
Total Current Liabilities		47,477,363		52,140,382		7,143,202

Operating lease liabilities - non-current (including ¥335,976 and ¥119,411 ($16,359) from related parties as of June 30, 2024 and December 31, 2024, respectively)		3,971,285		2,781,196		381,022
Long-term borrowings - related party		10,000,000		10,000,000		1,369,994
Warrant liability - non-current		6,969		17,504		2,398
Total Liabilities	¥	61,455,617	¥	64,939,082	$	8,896,616

Commitments and Contingencies

Shareholders’ Equity
Class A Ordinary Shares, $0.0001 US dollar par value, 500,000,000 shares authorized; 7,987,959 shares and 7,987,959 shares issued and outstanding as of June 30, 2024 and December 31, 2024, respectively		99,634		99,634		13,650
Class B Ordinary Shares, $0.0001 US dollar par value, 80,000,000 shares authorized; 7,100,000 shares and 20,000,000 shares issued and outstanding as of June 30, 2024 and December 31, 2024, respectively		4,693		14,038		1,923
Additional paid-in capital		681,476,717		686,830,523		94,095,396
Statutory reserve		4,148,929		4,148,929		568,401
Accumulated deficit		(220,312,085)		(240,900,414)		(33,003,221)
Accumulated other comprehensive income		37,136,649		38,344,150		5,253,127
Total Recon Technology, Ltd’ equity		502,554,537		488,536,860		66,929,276
Non-controlling interests		(11,620,640)		(11,761,910)		(1,611,375)
Total shareholders’ equity		490,933,897		476,774,950		65,317,901
Total Liabilities and Shareholders’ Equity	¥	552,389,514	¥	541,714,032	$	74,214,517

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

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)


	For the six months ended
	December 31,
	2023		2024		2024
	RMB		RMB		USD

Revenue		45,256,672		42,069,270		5,763,466
Cost of revenue		33,150,930		28,714,468		3,933,866
Gross profit		12,105,742		13,354,802		1,829,600

Selling and distribution expenses		4,547,115		5,177,944		709,375
General and administrative expenses		22,042,042		24,038,744		3,293,294
Allowance for credit losses		1,553,364		870,714		119,287
Research and development expenses		6,765,287		10,167,182		1,392,898
Operating expenses		34,907,808		40,254,584		5,514,854

Loss from operations		(22,802,066)		(26,899,782)		(3,685,254)

Other income (expenses)
Subsidy income		131,428		21,045		2,883
Interest income		12,060,640		7,136,259		977,663
Interest expense		(1,683,289)		(580,977)		(79,594)
Loss in fair value changes of warrants liability		(1,941,195)		(10,327)		(1,415)
Foreign exchange transaction loss		(76,040)		(313,263)		(42,917)
Other expenses		(8,701,288)		(80,945)		(11,088)
Other income, net		(209,744)		6,171,792		845,532
Loss before income tax		(23,011,810)		(20,727,990)		(2,839,722)
Income tax expenses		96,041		1,609		220
Net loss		(23,107,851)		(20,729,599)		(2,839,942)

Less: Net loss attributable to non-controlling interests		(553,829)		(141,270)		(19,354)
Net loss attributable to Recon Technology, Ltd	¥	(22,554,022)	¥	(20,588,329)	$	(2,820,588)

Comprehensive income (loss)
Net loss		(23,107,851)		(20,729,599)		(2,839,942)
Foreign currency translation adjustment		(4,609,399)		1,207,501		165,427
Comprehensive loss		(27,717,250)		(19,522,098)		(2,674,515)
Less: Comprehensive loss attributable to non- controlling interests		(553,829)		(141,270)		(19,354)
Comprehensive loss attributable to Recon Technology, Ltd	¥	(27,163,421)	¥	(19,380,828)	$	(2,655,161)

Loss per share - basic and diluted	¥	(8.27)	¥	(2.29)	$	(0.31)

Weighted - average shares -basic and diluted		2,728,056		8,978,328		8,978,328

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

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the six months ended December 31,
	2023		2024		2024
	RMB		RMB		US Dollars
Cash flows from operating activities:
Net loss	¥	(23,107,851)	¥	(20,729,599)	$	(2,839,942)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,426,971		1,724,066		236,196
Loss from disposal of equipment		32,252		9,607		1,316
Gain in fair value changes of warrants liability		10,461,075		10,327		1,415
Allowance for credit losses		1,553,364		870,714		119,287
Allowance for slow moving inventories		(350,637)		(523,228)		(71,682)
Amortization of right-of-use assets		570,959		1,532,232		209,915
Restricted shares issued for management and employees		2,866,560		5,353,151		733,376
Restricted shares issued for services		1,070,143		—		—
Accrued interest income from loans to third parties		(4,415,298)		(6,779,697)		(928,815)
Accrued interest income from short-term investment		(2,352,250)		—		—
Changes in operating assets and liabilities:
Notes receivable		(8,790,327)		(1,864,913)		(255,492)
Accounts receivable		(4,412,034)		(3,348,819)		(458,786)
Inventories		4,863,435		(718,490)		(98,433)
Other receivables		5,465,227		(358,057)		(49,051)
Other receivables-related parties		—		(4,000)		(548)
Purchase advances		558,040		81,256		11,132
Contract costs		10,442,916		8,057,774		1,103,911
Prepaid expense		54,734		(295,291)		(40,455)
Operating lease liabilities		(2,027,067)		(1,039,360)		(142,392)
Accounts payable		1,271,140		3,913,353		536,127
Other payables		(4,103,150)		(1,194,817)		(163,689)
Other payables-related parties		(383,378)		(511,754)		(70,110)
Contract liabilities		2,140,385		2,277,655		312,037
Accrued payroll and employees’ welfare		17,399		179,209		24,552
Taxes payable		537,591		691,901		94,790
Net cash used in operating activities		(6,609,801)		(12,666,780)		(1,735,341)

Cash flows from investing activities:
Purchases of property and equipment		(216,082)		(455,380)		(62,387)
Proceeds from disposal of equipment		20,000		—		—
Purchase of land use right		(15,000,251)		—		—
Collection of loans to third parties		44,613,948		2,904,352		397,895
Payments made for loans to third parties		(16,600,000)		(36,897,900)		(5,054,992)
Payments and prepayments for construction in progress		—		(5,337,873)		(731,286)
Payments for short-term investments		(131,598,400)		—		—
Redemption of short-term investments		180,338,865		88,892,092		12,178,167
Net cash generated by investing activities		61,558,080		49,105,291		6,727,397

Cash flows from financing activities:
Repayments of short-term bank loans		(123,000)		(843,487)		(115,557)
Proceeds from short-term borrowings-related parties		10,000,000		—		—
Repayments of short-term borrowings-related parties		(10,018,222)		—		—
Deferred offering costs		—		(810,082)		(110,981)
Redemption of warrants		(31,866,604)		—		—
Capital contribution by controlling shareholders		—		10,000		1,370
Net cash used in financing activities		(32,007,826)		(1,643,569)		(225,168)

Effect of exchange rate fluctuation on cash and restricted cash		(5,945,117)		(343,038)		(46,996)

Net increase in cash and restricted cash		16,995,336		34,451,904		4,719,892
Cash and restricted cash at beginning of period		104,857,345		110,840,610		15,185,101
Cash and restricted cash at end of period	¥	121,852,681	¥	145,292,514	$	19,904,993

Supplemental cash flow information
Cash paid during the period for interest	¥	468,440	¥	518,086	$	133,730
Cash paid during the period for taxes	¥	16,505	¥	1,363,403	$	294,729

Reconciliation of cash and restricted cash, beginning of period
Cash	¥	104,125,800	¥	109,991,674	$	15,068,797
Restricted cash		731,545		848,936		116,304
Cash and restricted cash, beginning of period	¥	104,857,345	¥	110,840,610	$	15,185,101

Reconciliation of cash and restricted cash, end of period
Cash	¥	121,848,777	¥	145,284,391	$	19,903,880
Restricted cash		3,904		8,123		1,113
Cash and restricted cash, end of period	¥	121,852,681	¥	145,292,514	$	19,904,993

Non-cash investing and financing activities
Right-of-use assets obtained in exchange for operating lease obligations	¥	298,783	¥	—	$	—

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


99.1		Unaudited Condensed Consolidated Interim Financial Statements and Related Notes for the Six Months Ended December 31, 2024 and 2023.

99.2		Management’s Discussion and Analysis of Financial Condition and Results of Operations.

99.3		Press release dated March 31, 2025 titled “Recon Technology Reports Financial Results for the First Six Months of Fiscal Year 2025.”

101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.


	RECON TECHNOLOGY, LTD

March 31, 2025	By:	/s/ Shenping Yin
		Shenping Yin
		Chief Executive Officer
		(Principal Executive Officer) and
		Duly Authorized Officer


Form 20-F ☒	Form 40-F ☐