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Document And Entity Information
9 Months Ended
Mar. 31, 2015
May 11, 2015
Document Information [Line Items]
Entity Registrant Name Recon Technology, Ltd
Entity Central Index Key 0001442620
Current Fiscal Year End Date --06-30
Entity Filer Category Smaller Reporting Company
Trading Symbol RCON
Entity Common Stock, Shares Outstanding 5,022,436
Document Type 10-Q
Amendment Flag false
Document Period End Date Mar 31, 2015
Document Fiscal Period Focus Q3
Document Fiscal Year Focus 2015
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CONDENSED CONSOLIDATED BALANCE SHEETS
Mar. 31, 2015
USD ($)
Mar. 31, 2015
CNY
Jun. 30, 2014
CNY
Mar. 31, 2015
All Other [Member]
USD ($)
Mar. 31, 2015
All Other [Member]
CNY
Jun. 30, 2014
All Other [Member]
CNY
Mar. 31, 2015
Related Party [Member]
USD ($)
Mar. 31, 2015
Related Party [Member]
CNY
Jun. 30, 2014
Related Party [Member]
CNY
Current assets
Cash and cash equivalents $ 763,757 4,665,869 18,094,586
Notes receivable 65,476 400,000 0
Trade accounts receivable, net 9,239,407 56,444,463 43,553,737 795,669 4,860,821 7,479,298
Inventories, net 3,131,044 19,127,861 14,336,602
Other receivables, net 4,449,174 27,180,449 18,293,043 0 0 1,414,433
Purchase advances, net 3,743,660 22,870,397 25,759,065 64,500 394,034 394,034
Prepaid expenses 687,608 4,200,662 2,634,664 59,321 362,400 230,000
Deferred tax asset 206,322 1,260,442 1,209,961
Total current assets 23,205,938 141,767,398 133,399,423
Property and equipment, net 208,463 1,273,521 1,321,538
Long-term trade accounts receivable, net 2,381,016 14,545,865 0 0 0 14,456,317
Long-term other receivable 555,684 3,394,731 5,353,104
Total Assets 26,351,101 160,981,515 154,530,382
Current liabilities
Short-term bank loans 1,309,522 8,000,000 10,000,000
Trade accounts payable 2,857,423 17,456,282 11,413,505
Other payables 196,267 1,199,015 1,765,079 609,812 3,725,403 3,306,024
Deferred revenue 454,483 2,776,485 4,419,824
Advances from customers 64,756 395,600 801,385
Accrued payroll and employees' welfare 50,672 309,558 417,624
Accrued expenses 58,435 356,980 203,051
Taxes payable 1,129,527 6,900,393 7,589,846
Short-term borrowings 1,672,637 10,218,308 5,207,728
Deferred tax liability 29,495 180,186 180,186
Warrants liability 32,604 199,179 5,021,621
Total current liabilities 8,465,633 51,717,389 50,325,873
Commitments and Contingency         
Equity
Common stock, ($ 0.0185 U.S. dollar par value, 25,000,000 and 100,000,000 shares authorized as of June 30, 2014 and March 31, 2015, respectively; 4,717,336 and 5,022,436 shares issued and outstanding as of June 30, 2014 and March 31, 2015, respectively) 106,641 651,495 616,865
Additional paid-in capital 14,389,419 87,906,399 83,061,058
Appropriated retained earnings 773,568 4,725,803 4,148,929
Unappropriated retained earnings 1,226,224 7,491,128 8,431,453
Accumulated other comprehensive loss (46,183) (282,129) (279,275)
Total shareholders' equity 16,449,669 100,492,696 95,979,030
Non-controlling interest 1,435,799 8,771,430 8,225,479
Total equity 17,885,468 109,264,126 104,204,509
Total Liabilities and Equity $ 26,351,101 160,981,515 154,530,382
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CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] (USD $)
Mar. 31, 2015
Jun. 30, 2014
Common shares, par value (in dollars per share) $ 0.0185 $ 0.0185
Common shares, shares authorized 100,000,000 25,000,000
Common shares, shares issued 5,022,436 4,717,336
Common shares, shares outstanding 5,022,436 4,717,336
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Mar. 31, 2015
USD ($)
Mar. 31, 2015
CNY
Mar. 31, 2014
CNY
Mar. 31, 2015
USD ($)
Mar. 31, 2015
CNY
Mar. 31, 2014
CNY
Mar. 31, 2015
Hardware And Software [Member]
USD ($)
Mar. 31, 2015
Hardware And Software [Member]
CNY
Mar. 31, 2014
Hardware And Software [Member]
CNY
Mar. 31, 2015
Hardware And Software [Member]
USD ($)
Mar. 31, 2015
Hardware And Software [Member]
CNY
Mar. 31, 2014
Hardware And Software [Member]
CNY
Mar. 31, 2015
Hardware And Software [Member]
Related Party [Member]
USD ($)
Mar. 31, 2015
Hardware And Software [Member]
Related Party [Member]
CNY
Mar. 31, 2014
Hardware And Software [Member]
Related Party [Member]
CNY
Mar. 31, 2015
Hardware And Software [Member]
Related Party [Member]
USD ($)
Mar. 31, 2015
Hardware And Software [Member]
Related Party [Member]
CNY
Mar. 31, 2014
Hardware And Software [Member]
Related Party [Member]
CNY
Mar. 31, 2015
Services [Member]
USD ($)
Mar. 31, 2015
Services [Member]
CNY
Mar. 31, 2014
Services [Member]
CNY
Mar. 31, 2015
Services [Member]
USD ($)
Mar. 31, 2015
Services [Member]
CNY
Mar. 31, 2014
Services [Member]
CNY
Revenues
Total revenues $ 3,276,897 20,018,890 18,232,470 $ 7,472,764 45,651,862 76,011,506 $ 3,005,162 18,358,835 17,998,444 $ 7,058,309 43,119,915 73,337,585 $ 271,735 1,660,055 153,846 $ 397,468 2,428,173 2,196,152 $ 0 0 80,180 $ 16,987 103,774 477,769
Cost of revenues
Total cost of revenues 2,254,023 13,770,051 12,987,514 4,879,570 29,809,778 48,951,038 2,252,321 13,759,652 12,848,136 4,875,124 29,782,617 48,447,792 1,702 10,399 97,217 4,446 27,161 426,139 0 0 42,161 0 0 77,107
Gross profit 1,022,874 6,248,839 5,244,956 2,593,194 15,842,084 27,060,468
Selling and distribution expenses 181,670 1,109,838 1,097,549 501,727 3,065,098 4,701,989
General and administrative expenses 686,031 4,191,030 3,993,341 1,962,279 11,987,761 10,450,904
Research and development expenses 89,058 544,063 720,956 400,062 2,444,020 4,074,953
Operating expenses 956,759 5,844,931 5,811,846 2,864,068 17,496,879 19,227,846
Income (loss) from operations 66,115 403,908 (566,890) (270,874) (1,654,795) 7,832,622
Other income (expenses)
Subsidy income 25,397 155,155 201,711 104,675 639,473 1,220,024
Interest income 11,169 68,233 92,027 36,945 225,701 296,997
Interest expense (55,509) (339,109) (277,578) (132,272) (808,065) (757,226)
Change in fair value of warrants liability (1,504) (9,188) (904,883) 665,946 4,068,329 (904,327)
Loss from foreign currency exchange 294 1,799 31,312 (3,123) (19,081) (88,080)
Loss from warrant redemptions (313,182) (1,913,262) 0 (313,182) (1,913,262) 0
Other expense 5,836 35,653 (99,552) 18,387 112,325 (143,498)
Loss from investment 0 0 (135,547) 0 0 (870,627)
Income (loss) before income tax (261,384) (1,596,811) (1,659,400) 106,502 650,625 6,585,885
Provision (benefit) for income tax (29,616) (180,927) 150,787 76,608 468,005 1,609,976
Net Income (loss) (231,768) (1,415,884) (1,810,187) 29,894 182,620 4,975,909
Less: Net income attributable to non-controlling interest 18,235 111,398 120,415 89,386 546,071 1,045,396
Net Income (loss) attributable to Recon Technology, Ltd (250,003) (1,527,282) (1,930,602) (59,492) (363,451) 3,930,513
Comprehensive income (loss)
Net income (loss) (231,768) (1,415,884) (1,810,187) 29,894 182,620 4,975,909
Foreign currency translation adjustment (1,241) (7,580) (118,110) (467) (2,854) (40,833)
Comprehensive income (loss) (233,009) (1,423,464) (1,928,297) 29,427 179,766 4,935,076
Less: Comprehensive income attributable to non-controlling interest 18,175 111,032 108,604 89,367 545,952 1,041,313
Comprehensive income (loss) attributable to Recon Technology, Ltd $ (251,184) (1,534,496) (2,036,901) $ (59,940) (366,186) 3,893,763
Earnings (loss) per common share - basic (in dollars per share) $ (0.05) (0.32) (0.43) $ (0.01) (0.08) 0.93
Earnings (loss) per common share - diluted (in dollars per share) $ (0.05) (0.32) (0.43) $ (0.01) (0.08) 0.92
Weighted - average shares -basic (in shares) 4,839,004 4,839,004 4,528,311 4,757,112 4,757,112 4,211,785
Weighted - average shares -diluted (in shares) 4,839,004 4,839,004 4,757,112 4,757,112 4,269,510
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
9 Months Ended
Mar. 31, 2015
USD ($)
Mar. 31, 2015
CNY
Mar. 31, 2014
CNY
Mar. 31, 2015
All Other [Member]
USD ($)
Mar. 31, 2015
All Other [Member]
CNY
Mar. 31, 2014
All Other [Member]
CNY
Mar. 31, 2015
Related Party [Member]
USD ($)
Mar. 31, 2015
Related Party [Member]
CNY
Mar. 31, 2014
Related Party [Member]
CNY
Cash flows from operating activities:
Net income $ 29,894 182,620 4,975,909
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation 60,448 369,284 457,439
(Gain)/loss from disposal of equipment (24,472) (149,504) 67,587
Provision for doubtful accounts 41,679 254,622 668,610
Share based compensation 331,270 2,023,761 1,660,144
Loss from investment 0 0 870,627
Deferred tax benefit (8,263) (50,481) (75,715)
Change in fair value of warrants liability (665,946) (4,068,329) 904,327
Restricted shares issued for services 197,231 1,204,903 407,972
Loss from warrants redemption 313,182 1,913,262 0
Changes in operating assets and liabilities:
Notes receivable (65,476) (400,000) 2,578,855
Trade accounts receivable (4,765,889) (29,115,292) (17,127,239) 3,057,906 18,681,051 1,487,501
Inventories (784,282) (4,791,259) (8,823,683)
Other receivable, net (1,149,521) (7,022,533) 688,724 231,529 1,414,433 77,697
Purchase advance, net 294,254 1,797,628 (5,325,269)
Tax recoverable 0 0 575,650
Prepaid expense (256,339) (1,565,998) (580,144) (21,673) (132,400) 0
Trade accounts payable 989,144 6,042,777 6,211,777 0 0 (3,994,718)
Other payables (92,659) (566,064) (191,528) 68,648 419,379 (857,338)
Deferred revenue (268,999) (1,643,339) 945,091
Advances from customers (66,423) (405,785) (195,100)
Accrued payroll and employees' welfare (17,689) (108,066) (1,603,340)
Accrued expenses 30,354 185,433 (242,617)
Taxes payable (112,857) (689,453) 1,155,303
Net cash used in operating activities (2,654,949) (16,219,350) (15,283,478)
Cash flows from investing activities:
Purchase of property and equipment (84,138) (514,009) (258,922)
Proceeds from disposal of equipment 58,314 356,247 98,000
Net cash used in investing activities (25,824) (157,762) (160,922)
Cash flows from financing activities:
Proceeds from short-term bank loans 0 0 18,500,000
Repayments of short-term bank loans (327,380) (2,000,000) (12,870,000)
Proceeds from short-term borrowings 2,054,312 12,550,000 0
Repayment of short-term borrowings 0 0 (570,375) (1,235,861) (7,550,000) (5,303,279)
Proceeds from sale of common stock, net of issuance costs 0 0 12,132,882
Net cash provided by financing activities 491,071 3,000,000 11,889,228
Effect of exchange rate fluctuation on cash and cash equivalents (8,449) (51,605) 68,669
Net decrease in cash and cash equivalents (2,198,151) (13,428,717) (3,486,503)
Cash and cash equivalents at beginning of period 2,961,908 18,094,586 12,350,392
Cash and cash equivalents at end of period 763,757 4,665,869 8,863,889
Supplemental cash flow information
Cash paid during the period for interest 132,272 808,065 952,125
Cash paid during the period for taxes 100,870 616,225 700,268
Non-cash investing and financing activities
Cancelation of prior issuance of 40,625 shares of common stock for Advisoring services $ (164,136) (1,002,721) 0
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS [Parenthetical]
9 Months Ended
Mar. 31, 2015
Cancelation Of Prior Issuance Of Shares Of Common Stock For Professional Services, Shares 40,625
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ORGANIZATION AND NATURE OF OPERATIONS
9 Months Ended
Mar. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]
NOTE 1.
ORGANIZATION AND NATURE OF OPERATIONS
 
Organization – Recon Technology, Ltd (the “Company”) was incorporated under the laws of the Cayman Islands on August 21, 2007 as a company with limited liability. The Company provides oilfield specialized equipment, automation systems, tools, chemicals and field services to petroleum companies in the People’s Republic of China (the “PRC”). Its wholly owned subsidiary, Recon Technology Co., Limited (“Recon-HK”) was incorporated on September 6, 2007 in Hong Kong. Other than the equity interest in Recon-HK, the Company does not own any assets or conduct any operations. On November 15, 2007, Recon-HK established one wholly owned subsidiary, Jining Recon Technology Ltd. (“Recon-JN”) under the laws of the PRC. Other than the equity interest in Recon-JN, Recon-HK does not own any assets or conduct any operations. On November 19, 2011, the Company established one wholly owned subsidiary, Recon Investment Ltd. (“Recon-IN”) under the laws of HK. Other than the equity interest in Recon-IN, The Company does not own any assets or conduct any operations.
 
The Company conducts its business through the following PRC legal entities that were consolidated as variable interest entities (“VIEs”) and operate in the Chinese oilfield equipment & service industry:
 
1.
Beijing BHD Petroleum Technology Co., Ltd. (“BHD”), and
 
2.
Nanjing Recon Technology Co., Ltd. (“Nanjing Recon”).
 
On January 29, 2015, the Company increased its authorized shares from 25,000,000 to 100,000,000 ordinary shares.
 
Nature of Operations – The Company engaged in (1) providing equipment, tools and other hardware related to oilfield production and management, including simple installations in connection with some projects; (2) service to improve production and efficiency of exploited oil wells, and (3) developing and selling its own specialized industrial automation control and information solutions. The products and services provided by the Company include:
 
High-Efficiency Heating Furnaces - High-Efficiency Heating Furnaces are designed to remove the impurities and to prevent solidification blockage in transport pipes carrying crude petroleum. Crude petroleum contains certain impurities including water and natural gas, which must be removed before the petroleum can be sold.
 
Multi-Purpose Fissure Shaper - Multipurpose fissure shapers improve the extractors’ ability to test for and extract petroleum which requires perforation into the earth before any petroleum extractor can test for the presence of oil.
 
Horizontal Multistage Fracturing related Service - The Company mainly uses Baker Hughes FracPoint™ system and provides related service to oilfield companies. The Baker Hughes FracPoint™ system provided a completion method using packers to isolate sections of the wellbore (stages) and frac sleeves to direct the frac treatment to the desired stage. The use of this type of completion eliminated the need for cementing the liner, coiled tubing operations, and wireline operations, while significantly reducing overall pumping time.
 
Supervisory Control and Data Acquisition System (“SCADA”) - SCADA is an industrial computerized process control system for monitoring, managing and controlling petroleum extraction. SCADA integrates underground and aboveground activities of the petroleum extraction industry. This system can help to manage the oil extraction process in real-time to reduce the costs associated with extraction.
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SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Mar. 31, 2015
Accounting Policies [Abstract]
Significant Accounting Policies [Text Block]
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation - The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information pursuant to the rules of the SEC and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, 2014. The results of operations for the interim periods presented may not be indicative of the operating results to be expected for the Company’s fiscal year ending June 30, 2015.
   
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. We perform ongoing assessments to determine whether an entity should be considered a VIE and whether an entity previous identified as a VIE continues to be a VIE and whether we continue 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 the Chinese Yuan (“RMB”) and the accompanying consolidated financial statements have been expressed in Chinese Yuan. The statements as of and for the nine months period ended March 31, 2015 have been translated into United States dollars (“U.S. dollars”) solely for the convenience of the readers. The translation has been made at the rate of ¥6.1091 = US$1.00, the approximate exchange rate prevailing on March 31, 2015. These translated U.S. dollar amounts should not be construed as representing Chinese Yuan amounts or that the Chinese Yuan amounts have been or could be converted into U.S. dollars.
 
Estimates and assumptions- The preparation of the consolidated financial statements in conformity with U.S. GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates are adjusted to reflect actual experience when necessary. Significant estimates include revenue recognition, allowance for doubtful accounts, inventory valuation, warrants liability, the useful lives of property and equipment and the fair value of stock based payments. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.
 
Fair Values of Financial Instruments - The US GAAP accounting standards regarding fair value of financial instruments and related fair value measurements define fair value, establish a three-level valuation hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
 
The three levels of inputs are defined as follows:
 
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.
 
The carrying amounts reported in the consolidated balance sheets for trade accounts receivable, other receivables, purchase advances, trade accounts payable, accrued liabilities, advances from customers, short-term bank loan and short-term borrowings approximate fair value because of the immediate or short-term maturity of these financial instruments. Long-term borrowings approximate fair value because the interest rate charged approximates the market rate. Long-term other receivables approximate fair value because interest rate approximates the market rate. Long-term investment is carried at fair value, which was value determined using level 1 inputs. (See Note 8.)
 
The fair value of the warrants liability was determined using the Black-Scholes Model, as Level 2 inputs (See Note 13).
 
Cash and Cash Equivalents - Cash and cash equivalents are comprised of cash on hand, demand deposits and highly liquid short-term debt investments with stated original maturities of no more than three months. Since a majority of the bank accounts are located in the PRC, those bank balances are uninsured.
 
Trade Accounts, Notes and Other Receivables – Accounts and notes receivable are generates from products sold to or services provided to customers. Accounts receivable are carried at original invoiced amount less a provision for any potential uncollectible amounts. Accounts are considered past due when the related receivables are more than a year old. Provision is made against trade accounts and other receivables to the extent they are considered to be doubtful. Accounts are written off after extensive efforts at collection. Other receivables arise from transactions with non-trade customers. Notes receivable represents trade accounts receivable due from various customers where the customers’ banks have guaranteed the payments. The notes are non-interest bearing and normally paid within three to six months.
 
Purchase Advances - Purchase advances are the amounts prepaid to suppliers for purchases of inventory and are recognized as inventory when the final amount is paid to the suppliers and the inventory is delivered.
 
Inventories - Inventories are stated at the lower of cost or market value, on a weighted average basis for BHD. Inventories are stated at the lower of cost or market value, on a first-in-first-out basis for Nanjing Recon and ENI. The methods of determining inventory costs are used consistently from year to year. Allowance for inventory obsolescence is provided when the market value of certain inventory items are lower than the cost.
 
Property and Equipment - Property and equipment are stated at cost. Depreciation on motor vehicles and office equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from two to ten years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the assets.
 
Long-Lived Assets - The Company applies the ASC Topic 360 “Property, plant and equipment.” ASC Topic 360 requires that long-lived assets, such as property and equipment be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined based on the estimated discounted future cash flows expected to be generated by the asset. There were no impairments at June 30, 2014 and March 31, 2015.
 
Revenue Recognition - The Company recognizes revenue when the following four criteria are met: (1) persuasive evidence of an arrangement, (2) delivery has occurred or services have been provided, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured. Delivery does not occur until products have been shipped or services have been provided to the customers and the customers have signed a completion and acceptance report, risk of loss has transferred to the customers, customers acceptance provisions have lapsed, or the Company has objective evidence that the criteria specified in customers’ acceptance provisions have been satisfied. The sales price is not considered to be fixed or determinable until all contingencies related to the sale have been resolved.
 
Hardware:
Revenue from hardware sales is generally recognized when the product is shipped to the customer and when there are no unfulfilled company obligations that affect the customer’s final acceptance of the arrangement.
 
Software:
The Company sells self-developed software. For software sales, the Company recognizes revenues in accordance with ASC Topic 985 - 605 “Software Revenue Recognition”. Revenue from software is recognized according to project contracts. Contract costs are accumulated during the periods of installation and testing or commissioning. Usually this is short term. Revenue is not recognized until completion of the contracts and receipt of acceptance statements.
 
Service:
The Company provides services to improve software function and system operation on separated fixed-price contracts. Revenue is recognized on the completed contract method when acceptance is determined by a completion report signed by the customer.
 
Deferred revenue represents unearned amounts billed to customers related to sales contracts.
  
Subsidy Income - Grants are given 1) by the government to support local software companies’ operation and research and development and 2) by some local government to support development of selected middle and small-sized enterprises. Grants related to research and development projects are recognized as subsidy income in the unaudited condensed consolidated statements of operations when received. Grants in the form of value-added-tax refund for software products are recognized when received.
 
Share-Based Compensation - The Company accounts for share-based compensation in accordance with ASC Topic 718, Share-Based Payment. Under the fair value recognition provisions of this topic, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight–line basis over the requisite service period for the entire award. The Company has elected to recognize compensation expenses mainly using the Black-Scholes valuation model estimated at the grant date based on the award’s fair value.
 
Income Taxes - Income taxes are provided based upon the liability method of accounting pursuant to ASC Topic 740, Accounting for Income Taxes. Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes. Deferred taxes are provided on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, and tax carry forwards. 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.
 
Under ASC Topic 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. Income tax returns for the years prior to 2010 are no longer subject to examination by tax authorities.
 
Earnings per Share (“EPS”) - Basic EPS is computed by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding. Diluted EPS are computed by dividing net income attributable to ordinary shareholders by the weighted-average number of ordinary shares and dilutive potential ordinary share equivalents outstanding.
 
Potentially dilutive ordinary shares consist of ordinary shares issuable upon the conversion of ordinary stock options, restricted shares and warrants (using the treasury stock method).  For the nine months ended March 31, 2014, there were 57,725 restricted shares included in the weighted average dilutive shares calculation. The effect from options, restricted shares and warrants would have been anti-dilutive due to the fact that we incurred a net loss during the nine months ended March 31, 2015 and three months ended March 31, 2014 and 2015.
 
Recently Issued Accounting Pronouncements - 
 
In January 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810) – Amendments to the Consolidation Analysis". The ASU concludes the FASB’s project to rescind the indefinite deferral of the VIE guidance in ASU 2009-17 for reporting entities with variable interests in legal entities that have the attributes of an investment company that meet certain criteria (ASU 2010-103). The ASU also makes changes to the VOE consolidation model. The ASU does not change the general order in which the consolidation models are applied. A reporting entity that holds an economic interest in, or is otherwise involved with, another legal entity (has a “variable interest”) should first determine if the VIE model applies, and if so, whether it holds a controlling financial interest under that model. If the entity being evaluated for consolidation is not a VIE, then the VOE model should be applied to determine whether the entity should be consolidated by the reporting entity. Since consolidation is only assessed for legal entities, the determination of whether there is a legal entity is important. It is often clear when the entity is incorporated, but unincorporated structures can also be legal entities and judgment may be required to make that determination. The amendments in this Update are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and for interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. Management is evaluating the significant impact, if any, on the Company’s consolidated financial statements.
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TRADE ACCOUNTS RECEIVABLE, NET
9 Months Ended
Mar. 31, 2015
Receivables [Abstract]
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
NOTE 3. TRADE ACCOUNTS RECEIVABLE, NET
 
Accounts receivable consisted of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Third Party
 
RMB
 
RMB
 
U.S. Dollars
 
Trade accounts receivable
 
¥
48,284,531
 
¥
61,237,751
 
$
10,024,022
 
Allowance for doubtful accounts
 
 
(4,730,794)
 
 
(4,793,288)
 
 
(784,615)
 
Total - third- party, net
 
¥
43,553,737
 
¥
56,444,463
 
$
9,239,407
 
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Third Party – Long-term
 
RMB
 
RMB
 
U.S. Dollars
 
Beijing Yabei Nuoda Science and Technology Co. Ltd *.
 
¥
-
 
¥
16,162,072
 
$
2,645,573
 
Allowance for doubtful accounts
 
 
-
 
 
(1,616,207)
 
 
(264,557)
 
Total - long-term trade accounts receivable, net
 
¥
-
 
¥
14,545,865
 
$
2,381,016
 
 
The receivable from Yabei Nuoda was recognized primarily from the sale of automation system and services based on written contracts. Based on the repayment agreement signed on August 27, 2014, the outstanding balance will be collected in four years beginning 2016, with each installment of ¥4,015,644.
 
* One of the Founders, Mr. Yin Shenping, was the legal representative of Beijing Yabei Nuoda Science and Technology Co. Ltd (“Yabei Nuoda”) before December 2013 and Chairman as of September 30, 2014. On October 30, 2014, Mr. Yin resigned from the chairman position and thus Yabei Nuoda is not a related party of the Company after October 30, 2014.
Mr. Yin does not have any equity interest in this company currently.
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Related Party
 
RMB
 
RMB
 
U.S. Dollars
 
Beijing Yabei Nuoda Science and Technology Co. Ltd. *
 
¥
5,441,498
 
¥
-
 
$
-
 
Beijing Langchen Construction Company
 
 
726,800
 
 
817,821
 
 
133,869
 
Xiamen Huangsheng Hitek Computer Network Co.Ltd.
 
 
100,000
 
 
980,000
 
 
160,417
 
Xiamen Henda Hitek Computer Network Co. Ltd.
 
 
1,211,000
 
 
3,063,000
 
 
501,383
 
Total - related-parties, net
 
¥
7,479,298
 
¥
4,860,821
 
$
795,669
 
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Third Party – Long-term
 
RMB
 
RMB
 
U.S. Dollars
 
Beijing Yabei Nuoda Science and Technology Co. Ltd .
 
¥
16,062,574
 
¥
-
 
$
-
 
Allowance for doubtful accounts
 
 
(1,606,257)
 
 
-
 
 
-
 
Total - long-term trade accounts receivable, net
 
¥
14,456,317
 
¥
-
 
$
-
 
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OTHER RECEIVABLES, NET
9 Months Ended
Mar. 31, 2015
Other Receivables [Abstract]
Other Receivables Disclosure [Text Block]
NOTE 4. OTHER RECEIVABLES, NET
 
Other receivables consisted of the following:
 
Third Party
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Current Portion
 
RMB
 
RMB
 
U.S. Dollars
 
Due from ENI (A)
 
¥
2,523,145
 
¥
3,297,614
 
$
539,787
 
Loans to third parties (B)
 
 
8,979,408
 
 
14,137,270
 
 
2,314,133
 
Business advance to staff (C )
 
 
6,371,923
 
 
8,609,900
 
 
1,409,357
 
Deposits for projects
 
 
495,961
 
 
613,130
 
 
100,363
 
Others
 
 
373,622
 
 
1,067,050
 
 
174,666
 
Allowance for doubtful accounts
 
 
(451,016)
 
 
(544,515)
 
 
(89,132)
 
Total
 
¥
18,293,043
 
¥
27,180,449
 
$
4,449,174
 
 
Third Party
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Non-Current Portion
 
RMB
 
RMB
 
U.S. Dollars
 
Due from ENI (A)
 
¥
5,353,104
 
¥
3,394,731
 
$
555,684
 
Total
 
¥
5,353,104
 
¥
3,394,731
 
$
555,684
 
 
(A)
After ENI ceased to be a VIE of the Company, ENI in January 2012 agreed to repay the loan on a payment schedule, with interest accrued during the period at an annual rate of 4%. In accordance with the payment schedule, the principal plus accrued interest is required to be repaid over approximately three years on a quarterly basis beginning March 2012. The first four payments are RMB 1.2 million each. In March, June, September and December of 2012, the Company received RMB 4.8 million. Starting March 2013, installments for each quarter would be ¥1,777,653. The Company received the payments on time in March and June, 2013. On September 30, 2013, ENI proposed to extend the payment period and signed a new contract with the Company. According to the new arrangement, the remaining part of this loan will be repaid over four years with quarterly installments of ¥699,147. The Company has continued to receive the payments under the agreement. The payment due on March 30, 2015 was received on April 08, 2015.
 
(B)
Loans to third parties are mainly used for short-term funding to support cooperative companies. These loans are due on demand bearing no interest.
 
(C)
Business advance to staff represents advances for business travel and sundry expenses related to oilfield or on-site installation and inspection of products through customer approval and acceptance.
  
Other receivables - related parties represent loans to related parties for working capital advances to related entities. Such advances are due-on-demand and non-interest bearing.
 
Below is a summary of other receivables - related parties which consisted of the following:
 
Related Party
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Name of Related Party
 
RMB
 
RMB
 
U.S. Dollars
 
Beijing Yabei Nuoda Science and Technology Co. Ltd. *
 
¥
500,000
 
 
-
 
$
-
 
Beijing Langchen Construction Company
 
 
913,780
 
 
-
 
 
-
 
Other-business advances
 
 
653
 
 
-
 
 
-
 
Total
 
¥
1,414,433
 
¥
-
 
$
-
 
 
* Not a related party after October 31, 2014.
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PURCHASE ADVANCES
9 Months Ended
Mar. 31, 2015
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Other Assets Disclosure [Text Block]
NOTE 5. PURCHASE ADVANCES
 
The Company purchased products and services from a third-party and a related party during the normal course of business. Purchase advances consisted of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Third Party
 
RMB
 
RMB
 
U.S. Dollars
 
Prepayment for inventory purchase
 
¥
27,119,326
 
¥
24,319,337
 
$
3,980,838
 
Allowance for doubtful accounts
 
 
(1,360,261)
 
 
(1,448,940)
 
 
(237,178)
 
Total
 
¥
25,759,065
 
¥
22,870,397
 
$
3,743,660
 
 
Below is a summary of purchase advances to related party.
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Related Party
 
RMB
 
RMB
 
U.S. Dollars
 
Xiamen Huasheng Hitek Computer Network Co. Ltd. (A)
 
¥
394,034
 
¥
394,034
 
$
64,500
 
Total
 
¥
394,034
 
¥
394,034
 
$
64,500
 
 
The Company entered into a purchase agreement with Xiamen Huasheng Hitek in September, 2014 and planned to offset the purchase advance. At September 30, 2014, remaining amount to be paid was ¥797,585, which was included in accounts payable-related party. In October, 2014, the Company didn’t offset the advance payment and paid the whole contract amount in cash.
 
(A) One of the Founders and a family member collectively own 57% of Xiamen Huasheng Hitek Computer Network Co. Ltd. Current ending balance of the purchase advances to Xiamen Huasheng Hitek is expect to be settled before year end.
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INVENTORIES
9 Months Ended
Mar. 31, 2015
Inventory Disclosure [Abstract]
Inventory Disclosure [Text Block]
NOTE 6. INVENTORIES
 
Inventories consisted of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
 
 
RMB
 
RMB
 
U.S. Dollars
 
Small component parts
 
¥
55,262
 
¥
55,232
 
$
9,041
 
Purchased goods and raw materials
 
 
272,416
 
 
636,368
 
 
104,167
 
Work in process
 
 
1,665,447
 
 
2,457,649
 
 
402,293
 
Finished goods
 
 
12,343,477
 
 
15,978,612
 
 
2,615,543
 
Total inventories
 
¥
14,336,602
 
¥
19,127,861
 
$
3,131,044
 
 
There was no inventory obsolescence reserve at June 30, 2014 and March 31, 2015.
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PROPERTY AND EQUIPMENT, NET
9 Months Ended
Mar. 31, 2015
Property, Plant and Equipment [Abstract]
Property, Plant and Equipment Disclosure [Text Block]
NOTE 7. PROPERTY AND EQUIPMENT, NET
 
Property and equipment consisted of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
 
 
RMB
 
RMB
 
U.S. Dollars
 
Motor vehicles
 
¥
2,314,296
 
¥
2,244,148
 
$
367,345
 
Office equipment and fixtures
 
 
709,165
 
 
793,923
 
 
129,957
 
Total property and equipment
 
 
3,023,461
 
 
3,038,071
 
 
497,302
 
Less: Accumulated depreciation
 
 
(1,701,923)
 
 
(1,764,550)
 
 
(288,839)
 
Property and equipment, net
 
¥
1,321,538
 
¥
1,273,521
 
$
208,463
 
 
Depreciation expense was ¥156,098 and ¥94,773 ($15,513) for the three months ended March 31, 2014 and 2015, respectively.
 
Depreciation expense was ¥457,439 and ¥369,284 ($60,448) for the nine months ended March 31, 2014 and 2015, respectively.
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LONG-TERM INVESTMENT
9 Months Ended
Mar. 31, 2015
Equity Method Investments and Joint Ventures [Abstract]
Equity Method Investments and Joint Ventures Disclosure [Text Block]
NOTE 8. LONG-TERM INVESTMENT
 
On June 28, 2013, the Company purchased 2,800,000 restricted shares of Avalon Oil and Gas, Inc. ("Avalon") for $0.089 per share, or approximately ¥1.5 million ($250,000). Since the restriction for the shares is for two years, the Company was able to acquire the shares at 50% of the market value. The investment was accounted for using the equity method and no gain or loss from equity investment was recorded for the year ended June 30, 2013 due to immateriality. As of June 30, 2014 and March 31, 2015, Recon owned 24.02% and 23.61  % of Avalon’s outstanding shares, respectively. Avalon is an independent US domestic oil and natural gas producer listed on the OTCBB under the ticker symbol AOGN. Avalon is building a portfolio of oil and gas producing properties to generate asset growth. However, the stock is not actively traded and, based on available information and discussion with the management team of Avalon, we believe Avalon’s operating loss would not be recovered in the foreseeable future, therefore, the Company considered the investment to be impaired and recorded an investment loss of ¥1,535,250 ($250,000) for the year ended June 30, 2014 to write its investment down to zero.
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OTHER PAYABLES
9 Months Ended
Mar. 31, 2015
Other Liabilities Disclosure [Abstract]
Other Liabilities Disclosure [Text Block]
NOTE 9. OTHER PAYABLES
 
Other payables consisted of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Third Party
 
RMB
 
RMB
 
U.S. Dollars
 
Consulting services
 
¥
777,863
 
¥
774,927
 
$
126,848
 
Distributors and employees
 
 
973,707
 
 
411,607
 
 
67,376
 
Others
 
 
13,509
 
 
12,481
 
 
2,043
 
Total
 
¥
1,765,079
 
¥
1,199,015
 
$
196,267
 
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Related Party
 
RMB
 
RMB
 
U.S. Dollars
 
Due to related parties (1)
 
¥
2,560,648
 
¥
2,499,347
 
$
409,119
 
Expenses paid by the major shareholders
 
 
439,071
 
 
974,964
 
 
159,592
 
Due to family member of one owner on behalf on Recon
 
 
50,000
 
 
-
 
 
-
 
Due to management staff on behalf of Recon
 
 
256,305
 
 
251,092
 
 
41,101
 
Total
 
¥
3,306,024
 
¥
3,725,403
 
$
609,812
 
 
(1)
Includes an advance from Xiamen Henda Haitek for RMB 2,499,347 to supplement the Company’s working capital. The advances are payable on demand and non-interest bearing.
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TAXES PAYABLE
9 Months Ended
Mar. 31, 2015
Taxes Payable [Abstract]
Taxes Payable Disclosure [Text Block]
NOTE 10. TAXES PAYABLE
 
Taxes payable consisted of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
 
 
RMB
 
RMB
 
U.S. Dollars
 
VAT payable
 
¥
3,412,759
 
¥
2,768,996
 
$
453,258
 
Enterprise income tax payable
 
 
4,134,210
 
 
4,084,853
 
 
668,651
 
Other taxes payable
 
 
42,877
 
 
46,544
 
 
7,618
 
Total taxes payable
 
¥
7,589,846
 
¥
6,900,393
 
$
1,129,527
 
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SHORT-TERM BANK LOANS
9 Months Ended
Mar. 31, 2015
Debt Disclosure [Abstract]
Short Term Bank Loan [Text Block]
NOTE 11. SHORT-TERM BANK LOANS
 
Short-term bank loans consisted of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
 
 
RMB
 
RMB
 
U.S. Dollars
 
Industrial and commercial bank, floating interest rate at 5.6%, due on December 24, 2014
 
¥
2,000,000
 
¥
-
 
 
-
 
Industrial and commercial bank, floating interest rate at 6.0%,  due on June 24, 2015
 
 
8,000,000
 
 
8,000,000
 
 
1,309,522
 
Total short-term bank loans
 
¥
10,000,000
 
¥
8,000,000
 
$
1,309,522
 
   
Interest expense was ¥277,445 and ¥162,000 ($26,518) for the three months ended March 31, 2014 and 2015, respectively.
 
Interest expense was ¥754,202 and ¥400,178 ($65,505) for the nine months ended March 31, 2014 and 2015, respectively.
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SHORT-TERM BORROWINGS DUE TO RELATED PARTIES
9 Months Ended
Mar. 31, 2015
Debt Disclosure [Abstract]
Short-term Debt [Text Block]
NOTE 12. SHORT-TERM BORROWINGS DUE TO RELATED PARTIES
 
Short-term borrowings due to related parties are generally extended upon maturity and consisted of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Short-term borrowings due to related parties:
 
RMB
 
RMB
 
U.S. Dollars
 
Short-term borrowing from a Founder, 6.6% annual interest, due on December 25, 2014
 
¥
5,007,728
 
¥
-
 
 
-
 
Short-term borrowing from a Founder, 7.0% annual interest, due on October 22, 2015
 
 
 
 
 
6,014,400
 
 
984,499
 
Short-term borrowing from a Founder, 6.0% annual interest, due on October 2, 2015
 
 
 
 
 
3,402,658
 
 
556,982
 
Short-term borrowing from a Founder, 6.2% annual interest, due on October 12, 2015
 
 
 
 
 
601,250
 
 
98,418
 
Short-term borrowings from Xiamen Huasheng Haitian Computer Network Co. Ltd., no interest, due on November 14, 2015
 
 
200,000
 
 
200,000
 
 
32,738
 
Total short-term borrowings due to related parties
 
¥
5,207,728
 
¥
10,218,308
 
$
1,627,637
 
 
Interest expense for short-term borrowings due to related parties was none and ¥177,109 ($28,991) for the three months ended March 31, 2014 and 2015, respectively.
 
Interest expense for short-term borrowings due to related parties was ¥1,441 and ¥407,887 ($66,767) for the nine months ended March 31, 2014 and 2015, respectively.
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WARRANT LIABILITY
9 Months Ended
Mar. 31, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Derivative Instruments and Hedging Activities Disclosure [Text Block]
Note 13 –WARRANT LIABILITY
 
In connection with the stock offering in November 2013, the Company issued warrants to certain institutional investors and placement agent to purchase 218,600 ordinary shares at exercise price of $5.38.
 
On February 13, 2015, the Company redeemed 163,950 warrants by issuing 204,938 ordinary shares (1.25 shares of ordinary shares to exchange one warrant) to institutional investors. Based on the stock price of $2.11 and fair value of warrants liability on February 23, 2015, the Company recorded a loss on warrant redemption of ¥1,913,262 ($313,182) for the three and nine months ended March 31, 2015.
 
According to ASC 815-40, if the strike price of the warrants is denominated in a currency other than the Company’s functional currency, the warrants are not considered indexed to the entity’s own stock. The Company’s functional currency is RMB and the strike price of the warrants is denominated in USD, as a result, the warrants are classified as liabilities with all future changes in the fair value of these warrants recognized in earnings until such time as the warrants are exercised or expired.
 
These common stock purchase warrants do not trade in an active securities market, and as such, their fair value is estimated by using the Black–Scholes Option Pricing Model using the following assumptions:
  
 
 
 
March 31,
 
 
June 30,
 
 
 
 
2015
 
 
2014
 
Annual dividend yield
 
 
 
-
 
 
 
-
 
Exercised price
 
 
 
5.38
 
 
 
5.38
 
Underlying stock price at valuation date
 
 
 
1.80
 
 
 
3.86
 
Expected life (years)
 
 
 
1.67
 
 
 
2.42
 
Risk-free interest rate
 
 
 
0.56
%
 
 
0.88
%
Expected volatility
 
 
 
122
%
 
 
220
%
 
Expected volatility is based on the historical volatility of the Company’s common stock. The Company has no reason to believe future volatility over the expected remaining life of these warrants is likely to differ materially from historical volatility. The expected life is based on the remaining term of the warrants. The risk-free interest rate is based on U.S. Treasury securities according to the remaining term of the warrants. The expected dividend yield was based on the Company’s current and expected dividend policy.
 
The following table sets forth by level within the fair value hierarchy the warrants liability that was accounted at fair value on a recurring basis.
 
 
 
Fair Value Measurement at
 
Carrying Value at
 
Carrying Value at
 
 
 
June 30, 2014
 
June 30, 2014
 
June 30, 2014
 
 
 
Level 1
 
Level 2
 
Level 3
 
RMB
 
USD
 
Warrants liability
 
¥
-
 
¥
5,021,621
 
¥
-
 
¥
5,021,621
 
$
815,834
 
 
 
 
Fair Value Measurement at
 
Carrying Value at
 
Carrying Value at
 
 
 
March 31, 2015
 
March 31, 2015
 
March 31, 2015
 
 
 
Level 1
 
Level 2
 
Level 3
 
RMB
 
USD
 
Warrants liability
 
¥
-
 
¥
199,179
 
¥
-
 
¥
199,179
 
$
32,604
 
 
The following is a reconciliation of the beginning and ending balance of the warrant liability measured at fair value on a recurring basis for nine months ended March 31, 2015:
 
 
 
Change of warrants liability
 
 
 
RMB
 
USD
 
Beginning balance - June 30, 2014
 
¥
5,021,621
 
$
815,834
 
Warrant redemption
 
 
(754,113)
 
 
(117,284)
 
Change of warrant liability
 
 
(4,068,329)
 
 
(665,946)
 
Ending balance -March 31, 2015
 
¥
199,179
 
$
32,604
 
   
The following is the warrant activities:
 
 
 
 
Weighted
 
 
 
 
Average
 
 
 
 
Exercise Price
 
Warrants
 
 
Shares
 
Per Share
 
Outstanding as of June 30, 2014
 
 
388,600
 
$
6.18
 
Warrants redemption
 
 
(163,950)
 
 
5.38
 
Outstanding as of March 31, 2015
 
 
224,650
 
$
6.76
 
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SHAREHOLDERS' EQUITY
9 Months Ended
Mar. 31, 2015
Stockholders' Equity Note [Abstract]
Stockholders' Equity Note Disclosure [Text Block]
NOTE 14. SHAREHOLDERS’ EQUITY
 
Stock offering – On November 25, 2013, the Company entered into a securities purchase agreement (“Purchase Agreement”) with certain institutional investors for the sale of 546,500 ordinary shares in a registered direct offering at the price of $4.81 per ordinary share (amended to $4.30 per ordinary share on November 29, 2013). The net cash proceeds received from the stock offering, after deducting underwriter commission and other associated fees, were ¥12,132,882 (approximately $2.0 million). In addition, warrants to purchase 163,950 ordinary shares in the aggregate were issued to the investors. The warrants will be exercisable immediately as of the date of issuance at an exercise price of $6.01 per ordinary share (amended to $5.38 per ordinary share on November 29, 2013) and expire three years from the date of issuance. On February 13, 2015, the Company redeemed 163,950 warrants by issuing 204,938 ordinary shares (1.25 shares of ordinary shares to exchange one warrant) to institutional investors. The Company also issued warrants to purchase 54,650 ordinary shares to the placement agent (“Placement Agent Warrant”). The Placement Agent Warrants are on substantially the same terms as the warrants issued pursuant to the Purchase Agreement, except that these warrants are not exercisable for a period of six months and will expire three years from the initial exercise date.
 
In addition to the above warrants issued to the placement agent, the Company granted warrants for 170,000 shares in connection with its IPO offering, and none of these warrants was exercised during this period.
 
Appropriated Retained Earnings - According to the Memorandum and Articles of Association, the Company is required to transfer a certain portion of its net profit, as determined under PRC accounting regulations, from current net income to the statutory reserve fund. In accordance with the PRC Company Law, companies are required to transfer 10% of their profit after tax, as determined in accordance with PRC accounting standards and regulations, to the statutory reserves until such reserves reach 50% of the registered capital or paid-in capital of the companies. As of June 30, 2014 and March 31, 2015, the balance of total statutory reserves was ¥4,148,929 and ¥4,725,803 ($773,568).
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STOCK-BASED COMPENSATION
9 Months Ended
Mar. 31, 2015
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
NOTE 15. STOCK-BASED COMPENSATION
 
Stock-Based Awards Plan
 
2009 Options Plan  - The Company granted options to purchase 293,000 ordinary shares under the Stock Incentive 2009 Plan to its employees and non-employee directors on July 29, 2009. The options have an excise price of $6.00, equal to the IPO price of the Company’s ordinary shares, and will vest over a period of five years, with the first 20% vesting on July 29, 2010. The options expire ten years after the date of grant, on July 29, 2019. The fair value was estimated on July 29, 2009 using the Binomial Lattice valuation model, with the following weighted-average assumptions:
 
 
Stock price at grant date
 
$
6.00
 
Exercise price (per share)
 
$
6.00
 
Risk free rate of interest***
 
 
4.6118
%
Dividend yield
 
 
0.0
%
Life of option (years)**
 
 
10
 
Volatility*
 
 
78
%
Forfeiture rate****
 
 
0
%
 
* Volatility is projected using the performance of PHLX Oil Service Sector index.
** The life of options represents the period the option is expected to be outstanding.
*** The risk-free interest rate is based on the Chinese international bond denominated in U.S. dollar, with a maturity that approximates the life of the option.
**** Forfeiture rate is the estimated percentage of options forfeited by employees by leaving or being terminated before vesting.
 
The Company recognizes compensation cost for awards with graded vesting on a straight-line basis over the requisite service period for the entire award. The grant date fair value of the options was ¥30.17 ($4.42) per share.
 
2012 Options Plan The Company granted options to purchase 415,000 ordinary shares to its employees and non-employee director on March 26, 2012. The options have an excise price of $2.96, which was equal to the share price of the Company’s ordinary shares at March 26, 2012, and will vest over a period of five years, with the first 20% vesting on March 26, 2013. The options expire ten years after the date of grant, on March 26, 2022.
 
The Company recognizes compensation cost for awards with graded vesting on a straight-line basis over the requisite service period for the entire award. The grant date fair value of the options was ¥10.06 ($1.49) per share.
 
2015 Options Plan The Company granted options to purchase 400,000 ordinary shares to its employees and non-employee director on January 31, 2015. The options have an excise price of $1.65, which was equal to the share price of the Company’s ordinary shares at January 31, 2015, and will vest over a period of three years, with the one third vesting on January 31, 2016. The options expire ten years after the date of grant, on January 31, 2025.
 
The Company recognizes compensation cost for awards with graded vesting on a straight-line basis over the requisite service period for the entire award. The grant date fair value of the options was ¥10.13 ($1.65) per share.
 
The following is a summary of the stock options activity:
 
 
 
 
Weighted Average Exercise Price Per
 
Stock Options
Shares
 
Share
 
Outstanding as of July 1, 2014
 
 
415,600
 
$
4.37
 
Granted
 
 
400,000
 
 
1.65
 
Forfeited
 
 
-
 
 
-
 
Exercised
 
 
-
 
 
-
 
Outstanding as of March 31, 2015
 
 
815,600
 
$
3.04
 
 
The following is a summary of the status of options outstanding and exercisable at March 31, 2015:
 
Outstanding Options
 
Exercisable Options
 
 
 
 
 
Average
 
 
 
 
Average
 
 
 
 
 
Remaining
 
 
 
 
Remaining
 
Average Exercise
 
 
Contractual life
 
Average Exercise
 
 
Contractual
 
Price
 
 
Number
 
(Years)
 
Price
 
 
Number
 
life (Years)
 
$
6.00
 
 
193,000
 
 
4.33
 
$
6.00
 
 
193,000
 
 
4.33
 
$
2.96
 
 
222,600
 
 
6.99
 
$
2.96
 
 
74,200
 
 
6.99
 
$
1.65
 
 
400,000
 
 
9.85
 
 
-
 
 
-
 
 
-
 
 
 
 
 
815,600
 
 
 
 
 
 
 
 
 
 
 
 
 
   
During the nine months ending March 31, 2015, the Company granted restricted shares of common stock to consultants and executive officers as follows:
 
On July 19, 2014, the Company granted 50,000 restricted shares to a non-affiliate as compensation for certain consulting service. The fair value of the restricted shares was $190,000 based on the closing stock price $3.8 at July 18, 2014. On January 29, 2015, 10,000 restricted shares were canceled based on the agreement with the consultant.
 
On July 19, 2014, the Company decided to cancel 40,625 restricted shares, which was issued to Expert Asia Investment Ltd. on May 8, 2014, as the services were not provided pursuant to the agreement it had with the Company.
 
On December 13, 2013, the Company granted 95,181 restricted shares to Mr. Yin Shenping and 135,181 restricted shares to Mr. Chen Guangqiang at an aggregate value of ¥4,207,496 ($688,782), based on the stock closing price of $2.99 at December 13, 2013. These restricted shares will vest over three years with one third of the shares vesting every year from the grant date. The first one third was vested on December 13, 2014 and are now non-restricted.
 
On January 31, 2015, the Company granted 150,000 restricted shares to Mr. Yin Shenping and 150,000 restricted shares to Mr. Chen Guangqiang at an aggregate value of ¥3,038,558($495,000), based on the stock closing price of $1.65 at January 31, 2015. These restricted shares will vest over three years with one third of the shares vesting every year from the grant date.
 
On February 2, 2015, the Company issued 24,000 restricted shares to Maxim Group LLC (“Maxim”) for certain consulting service. The fair value of the restricted shares was $43,440 based on the closing stock price $1.81 at February 2, 2015.
 
Following is a summary of the non-vested restricted stock grants to executive officers:
 
Non-vested restricted stock grants
 
 
Shares
 
Non-vested as of June 30, 2014
 
 
230,362
 
Granted
 
 
374,000
 
Non-vested adjustment
 
 
40,625
 
Cancelled
 
 
(50,625)
 
Vested
 
 
(116,787)
 
Non-vested as of March 31, 2015
 
 
477,575
 
 
The Share-based compensation expense recorded for restricted shares granted was ¥418,553 and ¥1,226,745 ($199,696) for the nine months ended March 31, 2014 and 2015, respectively. Total unrecognized share-based compensation expense for these shares as of March 31, 2015 was approximately ¥5.2 million ($0.9 million), which is expected to be recognized over a weighted average period of approximately 2.32 years.
 
The Share-based compensation expense recorded for stock options granted were ¥1,241,591 and ¥797,016 ($129,742) for the nine months ended March 31, 2014 and 2015, respectively. The total unrecognized share-based compensation expense for stock options as of March 31, 2015 was approximately ¥5.5 million ($0.9 million), which is expected to be recognized over a weighted average period of approximately 2.58 years.
 
On January 28, 2015, the Company signed the “At-The-Market” offering agreement with Maxim Group LLC (“Maxim”). Maxim will serve as the exclusive agent for the Company in connection with the Company’s an at-the-market offering program for up to $10,000,000 of its registered common stock.
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INCOME TAX
9 Months Ended
Mar. 31, 2015
Income Tax Disclosure [Abstract]
Income Tax Disclosure [Text Block]
NOTE 16. 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 domestic companies. The Company follows Implementing Rules for the Enterprise Income Tax Law (“Implementing Rules”), which took effect on January 1, 2008 and unified the income tax rate for domestic-invested and foreign-invested enterprises at 25%.
 
The Company reapplied for high-technology enterprise approval and has passed all relevant reviews. Thus, for the calendar years 2013 and 2014, Nanjing Recon is subject to an income tax rate of 15%.
 
As approved by the domestic tax authority in the PRC, BHD was recognized as a government-certified high technology company on November 25, 2009 and is subject to an income tax rate of 15% through November 2015.
 
Deferred tax assets are comprised of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
 
 
RMB
 
RMB
 
U.S. Dollars
 
Allowance for doubtful receivables
 
¥
1,209,961
 
¥
1,260,442
 
$
206,322
 
Total deferred income tax assets
 
¥
1,209,961
 
¥
1,260,442
 
$
206,322
 
 
Deferred tax liability is comprised of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
 
 
RMB
 
RMB
 
U.S. Dollars
 
Income tax cost due to unpayable accounts
 
¥
180,186
 
¥
180,186
 
$
29,495
 
Total deferred income tax liability
 
¥
180,186
 
¥
180,186
 
$
29,495
 
  
The Company’s tax provision (benefit) is comprised of the following:
 
 
 
For the three months ended March 31,
 
 
 
2014
 
2015
 
2015
 
 
 
RMB
 
RMB
 
U.S. Dollars
 
Current income tax provision (benefit)
 
¥
194,291
 
¥
(158,423)
 
$
(25,932)
 
Deferred income taxes benefit
 
 
(43,504)
 
 
(22,504)
 
 
(3,684)
 
Provision (benefit) for income tax
 
¥
150,787
 
¥
(180,927)
 
$
(29,616)
 
 
 
 
For the nine months ended March 31,
 
 
 
2014
 
2015
 
2015
 
 
 
RMB
 
RMB
 
U.S. Dollars
 
Current income taxes
 
¥
1,685,691
 
¥
518,486
 
$
84,871
 
Deferred income taxes benefit
 
 
(75,715)
 
 
(50,481)
 
 
(8,263)
 
Provision for income tax
 
¥
1,609,976
 
¥
468,005
 
$
76,608
 
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NON-CONTROLLING INTEREST
9 Months Ended
Mar. 31, 2015
Noncontrolling Interest [Abstract]
Noncontrolling Interest Disclosure [Text Block]
NOTE 17. NON-CONTROLLING INTEREST
 
Non-controlling interest consisted of the following:
 
 
 
As of June 30, 2014
 
 
 
 
 
 
Nanjing
 
 
 
 
 
 
 
 
 
BHD
 
Recon
 
Total
 
Total
 
 
 
RMB
 
RMB
 
RMB
 
U.S. Dollars
 
Paid-in capital
 
¥
1,651,000
 
¥
200,000
 
¥
1,851,000
 
$
299,118
 
Unappropriated retained earnings
 
 
3,152,687
 
 
3,250,513
 
 
6,403,200
 
 
869,812
 
Accumulated other comprehensive loss
 
 
(16,868)
 
 
(11,853)
 
 
(28,721)
 
 
(5,265)
 
Total non-controlling interest
 
¥
4,786,819
 
¥
3,438,660
 
¥
8,225,479
 
$
1,163,665
 
 
 
 
As of March 31, 2015
 
 
 
 
 
 
Nanjing
 
 
 
 
 
 
 
 
 
BHD
 
Recon
 
Total
 
Total
 
 
 
RMB
 
RMB
 
RMB
 
U.S. Dollars
 
Paid-in capital
 
¥
1,651,000
 
¥
200,000
 
¥
1,851,000
 
$
302,991
 
Unappropriated retained earnings
 
 
3,414,997
 
 
3,534,273
 
 
6,949,270
 
 
1,137,528
 
Accumulated other comprehensive loss
 
 
(16,987)
 
 
(11,853)
 
 
(28,840)
 
 
(4,720)
 
Total non-controlling interest
 
¥
5,049,010
 
¥
3,722,420
 
¥
8,771,430
 
$
1,435,799
 
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CONCENTRATIONS
9 Months Ended
Mar. 31, 2015
Risks and Uncertainties [Abstract]
Concentration Risk Disclosure [Text Block]
NOTE 18. CONCENTRATIONS
 
For the three months ended March 31, 2014 and 2015, our two largest customers, China National Petroleum Corporation (“CNPC”) and China Petroleum & Chemical Corporation Limited (“SINOPEC”), represented 13.80%, and 24.80% and 29.65%, and  6.18% of the Company’s revenue, respectively.
 
For the nine months ended March 31, 2014 and 2015, our two largest customers, China National Petroleum Corporation (“CNPC”) and China Petroleum & Chemical Corporation Limited (“SINOPEC”), represented 46.62%, and  19.64% and 44.89%, and  7.70% of the Company’s revenue, respectively.
 
For the three months ended March 31, 2014, three major suppliers accounted for 66.4% of the company’s total purchases. For the three months ended March 31, 2015, one major supplier accounted for 56% of the company’s total purchases.
 
For the nine months ended March 31, 2014, two major suppliers accounted for 33.7% of the company’s total purchases. For the nine months ended March 31, 2015, one major supplier accounted for 21% of the company’s total purchases.
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COMMITMENTS AND CONTINGENCY
9 Months Ended
Mar. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies Disclosure [Text Block]
NOTE 19. COMMITMENTS AND CONTINGENCY
  
(a) Office Leases
 
The Company leased three offices in Beijing (two for BHD; one for Recon-JN), and one office in Nanjing for Nanjing Recon. Future payments under such leases are as follows as March 31, 2015:
 
 
Twelve months ending March 31,
 
 
 
Office lease payment
 
 
 
RMB
 
U.S. Dollars
 
2015
 
¥
1,145,833
 
$
187,562
 
2016
 
 
70,000
 
 
11,458
 
Total
 
¥
1,215,833
 
$
199,020
 
 
In January 2015, BHD renewed its lease agreements which amounted to ¥840,000 ($136,841) for one more year.
 
(b) Contingency
 
The Labor Contract Law of the PRC requires employers to assure the liability of severance payments if employees are terminated and have been working for the employers for at least two years prior to January 1, 2008. The employers will be liable for one month of severance pay for each year of the service provided by the employees. As of March 31, 2015, the Company estimated its severance payments of approximately ¥1.6 million ($0.3 million) which has not been reflected in its unaudited condensed consolidated financial statements because the Company has determined that the likelihood to make these payments is remote.
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RELATED PARTY TRANSACTIONS AND BALANCES
9 Months Ended
Mar. 31, 2015
Related Party Transactions [Abstract]
Related Party Transactions Disclosure [Text Block]
NOTE 20. RELATED PARTY TRANSACTIONS AND BALANCES
 
Sales to related parties sales to related parties consisted of the following:
 
 
 
For the three months ended March 31,
 
 
 
2014
 
2015
 
2015
 
 
 
RMB
 
RMB
 
U.S. Dollars
 
Beijing Yabei Nuoda Science and Technology Co. Ltd.
 
¥
68,376
 
¥
-
 
$
-
 
Xiamen Henda Haitian computer network Inc
 
 
-
 
 
907,918
 
 
148,619
 
Xiamen Huangsheng Hitek Computer Network Co. Ltd.
 
 
85,470
 
 
752,137
 
 
123,116
 
Revenues from related parties
 
¥
153,846
 
¥
1,660,055
 
$
271,735
 
 
 
 
For the nine months ended March 31,
 
 
 
2014
 
2015
 
2015
 
 
 
RMB
 
RMB
 
U.S. Dollars
 
Beijing Yabei Nuoda Science and Technology Co. Ltd.
 
¥
1,426,922
 
¥
-
 
$
-
 
Xiamen Henda Haitian computer network Inc
 
 
683,760
 
 
1,676,036
 
 
274,352
 
Xiamen Huangsheng Hitek Computer Network Co. Ltd.
 
 
85,470
 
 
752,137
 
 
123,116
 
Revenues from related parties
 
¥
2,196,152
 
¥
2,428,173
 
$
397,468
 
 
* Not a related party after October 31, 2014, (See Note 3).
 
Purchases from related parties –  purchases from related parties consisted of the following:
 
 
 
For the nine months ended March 31,
 
 
 
2013
 
2014
 
2014
 
 
 
RMB
 
RMB
 
U.S. Dollars
 
Xiamen Hengda Hitek Computer Network Co. Ltd.
 
¥
-
 
¥
797,585
 
$
130,557
 
Purchase  from related parties
 
¥
-
 
¥
797,585
 
$
130,557
 
  
There was no purchases from related parties for the three months ended March 31, 2014 and 2015.
 
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 for two years at a monthly rent of ¥95,000 with the annual rental expense at approximately ¥1.1 million ($0.2 million). The two-year lease agreements between Nanjing Recon and Mr. Yin and his family member started from July 10, 2014, the one-year lease agreements between BHD and Mr. Chen Guangqiang and his family member started from January 1, 2015 and the annual lease between the Company and Mr. Chen Guangqiang’s family member started from July 1, 2014. 
 
Short-term borrowings from related parties - The Company borrowed ¥5,207,728 and ¥10,218,308 ($1,672,637) from the Founders, their family members and senior officers as of June 30, 2014 and March 31, 2015, respectively. For the specific terms and interest rates of the borrowings, please see Note 12.
 
Expenses paid by the owner on behalf of Recon -  One owner of Nanjing Recon, Mr. Yin and the major owner of BHD, Mr. Chen paid certain operating expenses for the Company. As of June 30, 2014 and March 31, 2015, ¥284,370 and ¥974,964 ($159,592) was due to them, respectively.
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VARIABLE INTEREST ENTITIES
9 Months Ended
Mar. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Disclosure Of Variable Interest Entities [Text Block]
NOTE 21. Variable Interest Entities
 
The Company reports its VIEs’ portion of consolidated net income and stockholders’ equity as non-controlling interests in the condensed consolidated financial statements.
 
Summary information regarding consolidated VIEs is as follows:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
 
 
RMB
 
RMB
 
U.S. Dollars
 
ASSETS
 
 
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
¥
14,021,653
 
¥
2,863,037
 
$
468,651
 
Trade accounts receivable, net
 
 
51,033,035
 
 
61,305,284
 
 
10,035,076
 
Purchase advances
 
 
24,600,379
 
 
23,264,431
 
 
3,808,160
 
Other assets
 
 
34,097,774
 
 
48,131,388
 
 
7,878,638
 
Total current assets
 
¥
123,752,841
 
¥
135,564,140
 
$
22,190,525
 
 
 
 
 
 
 
 
 
 
 
 
Non-current assets
 
 
15,758,115
 
 
15,802,996
 
 
2,586,796
 
Total Assets
 
¥
139,510,956
 
¥
151,367,136
 
$
24,777,321
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
 
 
Trade accounts payable
 
¥
11,413,505
 
¥
17,456,282
 
$
2,857,423
 
Taxes payable
 
 
7,589,846
 
 
6,900,394
 
 
1,129,527
 
Other liabilities
 
 
21,878,699
 
 
25,629,857
 
 
4,195,357
 
Total current liabilities
 
 
40,882,050
 
 
49,986,533
 
 
8,182,307
 
Total Liabilities
 
¥
40,882,050
 
¥
49,986,533
 
$
8,182,307
 
 
The financial performance of VIEs reported in the unaudited condensed consolidated statement of operations and comprehensive income (loss) for the three months ended March 31, 2015 includes revenues of ¥20,018890 ($3,276,897), gross profit of ¥6,248,840 ($1,022,874), operating expenses of ¥3,156,785 ($516,735), other expense of ¥142,664($23,353) and a net income of ¥3,130,319($512,403).
 
The financial performance of VIEs reported in the unaudited condensed consolidated statement of operations and comprehensive income (loss) for the nine months ended March 31, 2015 includes revenues of ¥45,651,862 ($7,472,764), gross profit of ¥15,842,084 ($2,593,194), operating expenses of ¥9,281,759 ($1,519,333), other expense of ¥54,739($8,960) and a net income of ¥6,037,582 ($988,293).
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SUBSEQUENT EVENTS
9 Months Ended
Mar. 31, 2015
Subsequent Events [Abstract]
Subsequent Events [Text Block]
NOTE 22. SUBSEQUENT EVENTS 
 
On April 2, 2015, the Company borrowed ¥1.0 million ($163,690) from its Chief Technology Officer to supplement the Company’s working capital. This loan is due on October 12, 2015 with an annual interest rate of 6.16%. 
 
On April 8, 2015, the Company entered into a service agreement with an investor relations firm   with a consideration of 40,000 restricted shares for a one-year period of consulting services.
 
On April 15, 2015, the Company entered into certain warrant exchange agreements with a certain holder (the “Holder”) of warrants to purchase 54,650 ordinary shares of the Company (the “Warrants”) issued in the Company’s November 2013 registered offering for the Holder’s underwriting service. The Holder agreed to exchange the Warrants for 68,313 ordinary shares (the “Exchange Shares”), which equal one hundred and twenty five percent (125%) of the shares issuable upon exercise of the Warrants. The Exchange Shares will be issued to the Holder in exchange for the Warrant and without the payment of any other consideration by the Holder. Upon completion of the transaction contemplated in the Exchange Agreement on May 13, 2015, the Warrants have been automatically canceled and terminated. Based on the stock price of $1.94 and fair value of warrants liability on April 15, 2015, the Company recorded a one-time loss on warrant redemption of ¥585,276 ($95,804) on April 15, 2015.
 
On May 13, 2015, the Company entered into an Equity Distribution Agreement with Maxim Group LLC to create an at-the-market equity program (the “ATM Offering”) under which it may sell up to $10,000,000 worth of its ordinary shares (the “Shares”) from time to time through Maxim Group LLC, as sales agent. Shares will be issued pursuant to a base prospectus dated August 6, 2013 included in a previously filed and effective Registration Statement on Form S-3. On May 13, 2015, the Company filed a Prospectus Supplement relating to the ATM Offering with the Securities and Exchange Commission.
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SIGNIFICANT ACCOUNTING POLICIES (Policies)
9 Months Ended
Mar. 31, 2015
Accounting Policies [Abstract]
Basis of Accounting, Policy [Policy Text Block]
Basis of Presentation - The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information pursuant to the rules of the SEC and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, 2014. The results of operations for the interim periods presented may not be indicative of the operating results to be expected for the Company’s fiscal year ending June 30, 2015.
Consolidation, Variable Interest Entity, Policy [Policy Text Block]
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. We perform ongoing assessments to determine whether an entity should be considered a VIE and whether an entity previous identified as a VIE continues to be a VIE and whether we continue 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.
Foreign Currency Transactions and Translations Policy [Policy Text Block]
Currency Translation - The Company’s functional currency is the Chinese Yuan (“RMB”) and the accompanying consolidated financial statements have been expressed in Chinese Yuan. The statements as of and for the nine months period ended March 31, 2015 have been translated into United States dollars (“U.S. dollars”) solely for the convenience of the readers. The translation has been made at the rate of ¥6.1091 = US$1.00, the approximate exchange rate prevailing on March 31, 2015. These translated U.S. dollar amounts should not be construed as representing Chinese Yuan amounts or that the Chinese Yuan amounts have been or could be converted into U.S. dollars.
Use of Estimates, Policy [Policy Text Block]
Estimates and assumptions- The preparation of the consolidated financial statements in conformity with U.S. GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates are adjusted to reflect actual experience when necessary. Significant estimates include revenue recognition, allowance for doubtful accounts, inventory valuation, warrants liability, the useful lives of property and equipment and the fair value of stock based payments. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.
Fair Value of Financial Instruments, Policy [Policy Text Block]
Fair Values of Financial Instruments - The US GAAP accounting standards regarding fair value of financial instruments and related fair value measurements define fair value, establish a three-level valuation hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
 
The three levels of inputs are defined as follows:
 
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.
 
The carrying amounts reported in the consolidated balance sheets for trade accounts receivable, other receivables, purchase advances, trade accounts payable, accrued liabilities, advances from customers, short-term bank loan and short-term borrowings approximate fair value because of the immediate or short-term maturity of these financial instruments. Long-term borrowings approximate fair value because the interest rate charged approximates the market rate. Long-term other receivables approximate fair value because interest rate approximates the market rate. Long-term investment is carried at fair value, which was value determined using level 1 inputs. (See Note 8.)
 
The fair value of the warrants liability was determined using the Black-Scholes Model, as Level 2 inputs (See Note 13).
Cash and Cash Equivalents, Policy [Policy Text Block]
Cash and Cash Equivalents - Cash and cash equivalents are comprised of cash on hand, demand deposits and highly liquid short-term debt investments with stated original maturities of no more than three months. Since a majority of the bank accounts are located in the PRC, those bank balances are uninsured.
Trade and Other Accounts Receivable, Policy [Policy Text Block]
Trade Accounts, Notes and Other Receivables – Accounts and notes receivable are generates from products sold to or services provided to customers. Accounts receivable are carried at original invoiced amount less a provision for any potential uncollectible amounts. Accounts are considered past due when the related receivables are more than a year old. Provision is made against trade accounts and other receivables to the extent they are considered to be doubtful. Accounts are written off after extensive efforts at collection. Other receivables arise from transactions with non-trade customers. Notes receivable represents trade accounts receivable due from various customers where the customers’ banks have guaranteed the payments. The notes are non-interest bearing and normally paid within three to six months.
Purchase Advances [Policy Text Block]
Purchase Advances - Purchase advances are the amounts prepaid to suppliers for purchases of inventory and are recognized as inventory when the final amount is paid to the suppliers and the inventory is delivered.
Inventory, Policy [Policy Text Block]
Inventories - Inventories are stated at the lower of cost or market value, on a weighted average basis for BHD. Inventories are stated at the lower of cost or market value, on a first-in-first-out basis for Nanjing Recon and ENI. The methods of determining inventory costs are used consistently from year to year. Allowance for inventory obsolescence is provided when the market value of certain inventory items are lower than the cost.
Property, Plant and Equipment, Policy [Policy Text Block]
Property and Equipment - Property and equipment are stated at cost. Depreciation on motor vehicles and office equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from two to ten years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the assets.
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]
Long-Lived Assets - The Company applies the ASC Topic 360 “Property, plant and equipment.” ASC Topic 360 requires that long-lived assets, such as property and equipment be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined based on the estimated discounted future cash flows expected to be generated by the asset. There were no impairments at June 30, 2014 and March 31, 2015.
Revenue Recognition, Policy [Policy Text Block]
Revenue Recognition - The Company recognizes revenue when the following four criteria are met: (1) persuasive evidence of an arrangement, (2) delivery has occurred or services have been provided, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured. Delivery does not occur until products have been shipped or services have been provided to the customers and the customers have signed a completion and acceptance report, risk of loss has transferred to the customers, customers acceptance provisions have lapsed, or the Company has objective evidence that the criteria specified in customers’ acceptance provisions have been satisfied. The sales price is not considered to be fixed or determinable until all contingencies related to the sale have been resolved.
 
Hardware:
Revenue from hardware sales is generally recognized when the product is shipped to the customer and when there are no unfulfilled company obligations that affect the customer’s final acceptance of the arrangement.
 
Software:
The Company sells self-developed software. For software sales, the Company recognizes revenues in accordance with ASC Topic 985 - 605 “Software Revenue Recognition”. Revenue from software is recognized according to project contracts. Contract costs are accumulated during the periods of installation and testing or commissioning. Usually this is short term. Revenue is not recognized until completion of the contracts and receipt of acceptance statements.
 
Service:
The Company provides services to improve software function and system operation on separated fixed-price contracts. Revenue is recognized on the completed contract method when acceptance is determined by a completion report signed by the customer.
 
Deferred revenue represents unearned amounts billed to customers related to sales contracts.
Subsidy Income [Policy Text Block]
Subsidy Income - Grants are given 1) by the government to support local software companies’ operation and research and development and 2) by some local government to support development of selected middle and small-sized enterprises. Grants related to research and development projects are recognized as subsidy income in the unaudited condensed consolidated statements of operations when received. Grants in the form of value-added-tax refund for software products are recognized when received.
Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]
Share-Based Compensation - The Company accounts for share-based compensation in accordance with ASC Topic 718, Share-Based Payment. Under the fair value recognition provisions of this topic, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight–line basis over the requisite service period for the entire award. The Company has elected to recognize compensation expenses mainly using the Black-Scholes valuation model estimated at the grant date based on the award’s fair value.
Income Tax, Policy [Policy Text Block]
Income Taxes - Income taxes are provided based upon the liability method of accounting pursuant to ASC Topic 740, Accounting for Income Taxes. Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes. Deferred taxes are provided on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, and tax carry forwards. 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.
 
Under ASC Topic 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. Income tax returns for the years prior to 2010 are no longer subject to examination by tax authorities.
Earnings Per Share, Policy [Policy Text Block]
Earnings per Share (“EPS”) - Basic EPS is computed by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding. Diluted EPS are computed by dividing net income attributable to ordinary shareholders by the weighted-average number of ordinary shares and dilutive potential ordinary share equivalents outstanding.
 
Potentially dilutive ordinary shares consist of ordinary shares issuable upon the conversion of ordinary stock options, restricted shares and warrants (using the treasury stock method).  For the nine months ended March 31, 2014, there were 57,725 restricted shares included in the weighted average dilutive shares calculation. The effect from options, restricted shares and warrants would have been anti-dilutive due to the fact that we incurred a net loss during the nine months ended March 31, 2015 and three months ended March 31, 2014 and 2015.
New Accounting Pronouncements, Policy [Policy Text Block]
Recently Issued Accounting Pronouncements - 
 
In January 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810) – Amendments to the Consolidation Analysis". The ASU concludes the FASB’s project to rescind the indefinite deferral of the VIE guidance in ASU 2009-17 for reporting entities with variable interests in legal entities that have the attributes of an investment company that meet certain criteria (ASU 2010-103). The ASU also makes changes to the VOE consolidation model. The ASU does not change the general order in which the consolidation models are applied. A reporting entity that holds an economic interest in, or is otherwise involved with, another legal entity (has a “variable interest”) should first determine if the VIE model applies, and if so, whether it holds a controlling financial interest under that model. If the entity being evaluated for consolidation is not a VIE, then the VOE model should be applied to determine whether the entity should be consolidated by the reporting entity. Since consolidation is only assessed for legal entities, the determination of whether there is a legal entity is important. It is often clear when the entity is incorporated, but unincorporated structures can also be legal entities and judgment may be required to make that determination. The amendments in this Update are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and for interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. Management is evaluating the significant impact, if any, on the Company’s consolidated financial statements.
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TRADE ACCOUNTS RECEIVABLE, NET (Tables)
9 Months Ended
Mar. 31, 2015
Receivables [Abstract]
Schedule Of Accounts Receivable Third Party [Table Text Block]
Accounts receivable consisted of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Third Party
 
RMB
 
RMB
 
U.S. Dollars
 
Trade accounts receivable
 
¥
48,284,531
 
¥
61,237,751
 
$
10,024,022
 
Allowance for doubtful accounts
 
 
(4,730,794)
 
 
(4,793,288)
 
 
(784,615)
 
Total - third- party, net
 
¥
43,553,737
 
¥
56,444,463
 
$
9,239,407
 
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Third Party – Long-term
 
RMB
 
RMB
 
U.S. Dollars
 
Beijing Yabei Nuoda Science and Technology Co. Ltd *.
 
¥
-
 
¥
16,162,072
 
$
2,645,573
 
Allowance for doubtful accounts
 
 
-
 
 
(1,616,207)
 
 
(264,557)
 
Total - long-term trade accounts receivable, net
 
¥
-
 
¥
14,545,865
 
$
2,381,016
 
Schedule Of Accounts Receivable Related Party [Table Text Block]
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Related Party
 
RMB
 
RMB
 
U.S. Dollars
 
Beijing Yabei Nuoda Science and Technology Co. Ltd. *
 
¥
5,441,498
 
¥
-
 
$
-
 
Beijing Langchen Construction Company
 
 
726,800
 
 
817,821
 
 
133,869
 
Xiamen Huangsheng Hitek Computer Network Co.Ltd.
 
 
100,000
 
 
980,000
 
 
160,417
 
Xiamen Henda Hitek Computer Network Co. Ltd.
 
 
1,211,000
 
 
3,063,000
 
 
501,383
 
Total - related-parties, net
 
¥
7,479,298
 
¥
4,860,821
 
$
795,669
 
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Third Party – Long-term
 
RMB
 
RMB
 
U.S. Dollars
 
Beijing Yabei Nuoda Science and Technology Co. Ltd .
 
¥
16,062,574
 
¥
-
 
$
-
 
Allowance for doubtful accounts
 
 
(1,606,257)
 
 
-
 
 
-
 
Total - long-term trade accounts receivable, net
 
¥
14,456,317
 
¥
-
 
$
-
 
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OTHER RECEIVABLES, NET (Tables)
9 Months Ended
Mar. 31, 2015
Other Receivables [Abstract]
Schedule Of Other Receivables [Table Text Block]
Other receivables consisted of the following:
 
Third Party
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Current Portion
 
RMB
 
RMB
 
U.S. Dollars
 
Due from ENI (A)
 
¥
2,523,145
 
¥
3,297,614
 
$
539,787
 
Loans to third parties (B)
 
 
8,979,408
 
 
14,137,270
 
 
2,314,133
 
Business advance to staff (C )
 
 
6,371,923
 
 
8,609,900
 
 
1,409,357
 
Deposits for projects
 
 
495,961
 
 
613,130
 
 
100,363
 
Others
 
 
373,622
 
 
1,067,050
 
 
174,666
 
Allowance for doubtful accounts
 
 
(451,016)
 
 
(544,515)
 
 
(89,132)
 
Total
 
¥
18,293,043
 
¥
27,180,449
 
$
4,449,174
 
 
Third Party
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Non-Current Portion
 
RMB
 
RMB
 
U.S. Dollars
 
Due from ENI (A)
 
¥
5,353,104
 
¥
3,394,731
 
$
555,684
 
Total
 
¥
5,353,104
 
¥
3,394,731
 
$
555,684
 
 
(A)
After ENI ceased to be a VIE of the Company, ENI in January 2012 agreed to repay the loan on a payment schedule, with interest accrued during the period at an annual rate of 4%. In accordance with the payment schedule, the principal plus accrued interest is required to be repaid over approximately three years on a quarterly basis beginning March 2012. The first four payments are RMB 1.2 million each. In March, June, September and December of 2012, the Company received RMB 4.8 million. Starting March 2013, installments for each quarter would be ¥1,777,653. The Company received the payments on time in March and June, 2013. On September 30, 2013, ENI proposed to extend the payment period and signed a new contract with the Company. According to the new arrangement, the remaining part of this loan will be repaid over four years with quarterly installments of ¥699,147. The Company has continued to receive the payments under the agreement. The payment due on March 30, 2015 was received on April 08, 2015.
 
(B)
Loans to third parties are mainly used for short-term funding to support cooperative companies. These loans are due on demand bearing no interest.
 
(C)
Business advance to staff represents advances for business travel and sundry expenses related to oilfield or on-site installation and inspection of products through customer approval and acceptance.
Schedule Of Other Receivables Related Party [Table Text Block]
Below is a summary of other receivables - related parties which consisted of the following:
 
Related Party
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Name of Related Party
 
RMB
 
RMB
 
U.S. Dollars
 
Beijing Yabei Nuoda Science and Technology Co. Ltd. *
 
¥
500,000
 
 
-
 
$
-
 
Beijing Langchen Construction Company
 
 
913,780
 
 
-
 
 
-
 
Other-business advances
 
 
653
 
 
-
 
 
-
 
Total
 
¥
1,414,433
 
¥
-
 
$
-
 
 
* Not a related party after October 31, 2014.
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PURCHASE ADVANCES (Tables)
9 Months Ended
Mar. 31, 2015
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Schedule Of Purchase Advances [Table Text Block]
The Company purchased products and services from a third-party and a related party during the normal course of business. Purchase advances consisted of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Third Party
 
RMB
 
RMB
 
U.S. Dollars
 
Prepayment for inventory purchase
 
¥
27,119,326
 
¥
24,319,337
 
$
3,980,838
 
Allowance for doubtful accounts
 
 
(1,360,261)
 
 
(1,448,940)
 
 
(237,178)
 
Total
 
¥
25,759,065
 
¥
22,870,397
 
$
3,743,660
 
Schedule Of Purchase Advances To Related Party [Table Text Block]
Below is a summary of purchase advances to related party.
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Related Party
 
RMB
 
RMB
 
U.S. Dollars
 
Xiamen Huasheng Hitek Computer Network Co. Ltd. (A)
 
¥
394,034
 
¥
394,034
 
$
64,500
 
Total
 
¥
394,034
 
¥
394,034
 
$
64,500
 
 
(A) One of the Founders and a family member collectively own 57% of Xiamen Huasheng Hitek Computer Network Co. Ltd. Current ending balance of the purchase advances to Xiamen Huasheng Hitek is expect to be settled before year end.
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INVENTORIES (Tables)
9 Months Ended
Mar. 31, 2015
Inventory Disclosure [Abstract]
Schedule of Inventory, Current [Table Text Block]
Inventories consisted of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
 
 
RMB
 
RMB
 
U.S. Dollars
 
Small component parts
 
¥
55,262
 
¥
55,232
 
$
9,041
 
Purchased goods and raw materials
 
 
272,416
 
 
636,368
 
 
104,167
 
Work in process
 
 
1,665,447
 
 
2,457,649
 
 
402,293
 
Finished goods
 
 
12,343,477
 
 
15,978,612
 
 
2,615,543
 
Total inventories
 
¥
14,336,602
 
¥
19,127,861
 
$
3,131,044
 
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PROPERTY AND EQUIPMENT, NET (Tables)
9 Months Ended
Mar. 31, 2015
Property, Plant and Equipment [Abstract]
Property, Plant and Equipment [Table Text Block]
Property and equipment consisted of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
 
 
RMB
 
RMB
 
U.S. Dollars
 
Motor vehicles
 
¥
2,314,296
 
¥
2,244,148
 
$
367,345
 
Office equipment and fixtures
 
 
709,165
 
 
793,923
 
 
129,957
 
Total property and equipment
 
 
3,023,461
 
 
3,038,071
 
 
497,302
 
Less: Accumulated depreciation
 
 
(1,701,923)
 
 
(1,764,550)
 
 
(288,839)
 
Property and equipment, net
 
¥
1,321,538
 
¥
1,273,521
 
$
208,463
 
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OTHER PAYABLES (Tables)
9 Months Ended
Mar. 31, 2015
Other Liabilities Disclosure [Abstract]
Schedule Of Other Payables [Table Text Block]
Other payables consisted of the following:
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Third Party
 
RMB
 
RMB
 
U.S. Dollars
 
Consulting services
 
¥
777,863
 
¥
774,927
 
$
126,848
 
Distributors and employees
 
 
973,707
 
 
411,607
 
 
67,376
 
Others
 
 
13,509
 
 
12,481
 
 
2,043
 
Total
 
¥
1,765,079
 
¥
1,199,015
 
$
196,267
 
Schedule Of Other Payables Related Party [Table Text Block]
 
 
 
June 30, 2014
 
March 31, 2015
 
March 31, 2015
 
Related Party