As filed with the Securities and Exchange
Commission on March 17, 2025
Registration Statement No. 333-282048
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM F-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
RECON TECHNOLOGY, LTD
(Exact name of registrant as specified in its
charter)
| Cayman Islands |
1389 |
Not Applicable |
(State or other jurisdiction of
incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
Room
601, No.1 Shui’an South Street
Chaoyang District, Beijing, 100012
People’s Republic of China
+86-(10) 8494-5799 — telephone
(Address, including zip code, and telephone
number, including area code, of registrant’s principal executive offices)
CT Corporation System
28 Liberty St.
New York, NY 10005
+1-212-894-8940 — telephone
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
|
Anthony W. Basch, Esq.
Benming Zhang, Esq.
Kaufman & Canoles, P.C.
Two James Center, 14th Floor
1021 East Cary St.
Richmond, Virginia 23219
Telephone: +1 (804) 771-5700 |
|
|
|
Fang Liu, Esq.
VCL Law LLP
1945 Old Gallows Road
Suite 260
Vienna, Virginia 22182
Telephone: (703) 919-7285
|
Approximate date of commencement of proposed sale
to public: From time to time after the effective date of this Registration Statement.
If any securities
being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. ¨
If this Form is
filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is
a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is
a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant
is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth
company ¨
If an emerging growth
company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not
to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of
the Securities Act. ¨
| † |
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
The Registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which
specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
The information in this prospectus
is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
| PRELIMINARY PROSPECTUS |
SUBJECT
TO COMPLETION |
DATED
MARCH [●], 2025 |
RECON TECHNOLOGY, LTD
Up to [●] Class A Ordinary Shares
[●] Common Warrants to Purchase up
to an aggregate of [●] Class A Ordianry Shares (and up to an aggregate of [●] Class A Ordinary Shares issuable upon the exercise
of the Common Warrants)
We are offering on a “reasonable best efforts” basis up
to $20.0 million of Class A ordinary shares (“Class A Shares” or “Shares”) of Recon Technology, Ltd
at an assumed public offering price of $[●] per Share, which is the last reported sale price of our Class A Shares on The Nasdaq
Capital Market.
Our Shares are being offered together with
warrants, or “Common Warrants,” to purchase up to [●] Shares. Each Share will be sold together with one Common
Warrant. Each Common Warrant has an exercise price of $[●] per Share (representing 100% of the assumed public offering price per
Share to be sold in this offering) and will expire on the third anniversary of the original issuance date. Because we will issue a Common
Warrant for each Share sold in this offering, the number of Common Warrants sold in this offering will not change as a result of a change
in the Shares sold.
Our Shares and Common Warrants can only be
purchased together in this offering but will be issued separately. Shares issuable from time to time upon exercise of the Common Warrants
are also being offered by this prospectus.
The public offering price for our securities in
this offering will be determined at the time of pricing, and may be at a discount to the then current market price. The assumed public
offering price used throughout this prospectus may not be indicative of the final offering price. The final public offering price will
be determined through negotiation between us and investors based upon a number of factors, including our history and our prospects, the
industry in which we operate, our past and present operating results, the previous experience of our executive officers and the general
condition of the securities markets at the time of this offering.
There is no established public trading market
for the Common Warrants and we do not expect a market to develop. Without an active trading market, the liquidity of the warrants will
be limited. In addition, we do not intend to list the Common Warrants on The Nasdaq Capital Market, any other national securities exchange
or any other trading system.
Our Class A Shares are listed on the
Nasdaq Capital Market under the symbol “RCON.” On March 14, 2025, the last reported sale price of our Class A
Shares on the Nasdaq Capital Market was $1.498 per share. The applicable prospectus supplement will contain information, where applicable,
as to other listings, if any, on the Nasdaq Capital Market or other securities exchange of the securities covered by the prospectus supplement.
Investing in our securities involves a
high degree of risk, including the risk of losing your entire investment. See “Risk Factors” beginning on page 25
to read about factors you should consider before buying our securities.
We
are a Cayman Islands holding company. We are not a Chinese operating company, and do not conduct business operations directly in China.
All China operations are conducted by our subsidiaries established in the People’s Republic of China (“PRC” or “China”)
and in the Hong Kong Special Administrative Region of the People’s Republic of China (“HKSAR” or “Hong Kong”),
and by our contractual arrangements with variable interest entities, or “VIEs,” and the VIEs’ subsidiaries located
in China. This is an offering of the securities of the Cayman Islands holding company, which does not conduct operations. This
structure involves unique risks to investors. The VIE structure provides contractual exposure to foreign investment in Chinese-based
companies, pursuant to which U.S. GAAP accounting rules require us to consolidate such VIEs’ financial results in our financial
statements. VIE structures are generally used where Chinese law prohibits direct foreign investment in the operating companies. Investors
may never directly hold equity interests in the Chinese operating companies. Unless otherwise stated, as used in this prospectus and
in the context of describing our operations and consolidated financial information, “we,” “us,” “Company,”
or “our,” refers to Recon Technology, Ltd, a Cayman Islands exempted limited company, together with our subsidiaries. “Our
subsidiaries” refer to Recon Investment Ltd., Recon Hengda Technology (Beijing) Co. Ltd., Shandong Recon Renewable Resources Technology
Co., Ltd., and Guangxi Recon Renewable Resources Technology Co., Ltd., or Recon-IN, Recon-BJ, Recon-SD, and Recon-GX, respectively.
“VIEs” refers to the PRC variable interest entities and their subsidiaries (Nanjing Recon Technology Co., Beijing BHD Petroleum
Technology Co., Gan Su BHD Environmental Technology Co. Ltd, Huang Hua BHD Petroleum Equipment Manufacturing Co. Ltd., and Qing Hai BHD
New Energy Technology Co. Ltd., Future Gas Station (Beijing) Technology, Ltd., or “Nanjing Recon,” “BHD,”
“Gan Su BHD,” “HH BHD,” “Qing Hai BHD,” and “FGS” respectively). You are not investing
in Nanjing Recon, BHD, Gan Su BHD, HH BHD, Qing Hai BHD, or FGS. Instead, we entered into certain contracts (the “VIE Agreements”)
dated April 1, 2019, which are used to provide investors exposure to foreign investment in China-based companies where Chinese law
prohibits or restricts direct foreign investment in the operating companies. A wholly foreign-owned entity (“WFOE”) is a
limited liability company based in the People’s Republic of China but wholly owned by foreign investors. In our instance, Recon-BJ
is a WFOE wholly owned by us through our subsidiary, Recon-IN, a Hong Kong limited company. As a result of our direct ownership in the
WFOE and the VIE Agreements, we are regarded as the primary beneficiary of the VIE for accounting purposes.
Currently, we mainly conduct our business
through the VIEs, Nanjing Recon, BHD and their respective subsidiaries by means of Contractual Arrangements. Because we do not hold equity
interests in the VIEs and their subsidiaries, we are subject to risks due to the uncertainty of the interpretation and application of
the PRC laws and regulations regarding VIEs and the VIE structure, including but not limited to regulatory review of overseas listing
of PRC companies through a special purpose vehicle, and the validity and enforcement of the contractual arrangements with the VIEs. We
are also subject to the risk that the PRC government could disallow the VIE structure, which would likely result in a material change
in our operations and as a result the value of Securities may depreciate significantly or become worthless. At the time of this
filing, the Contractual Agreements have not been tested in a court of law.
For U.S. GAAP purposes, each VIE has its own
operating cash flow. Cash flow between our Company and the VIEs primarily consists of transfers from us to the VIEs for supplemental
working capital, which is mainly used in purchase of materials and payment of operating expenses and investments. In addition, the VIEs
occasionally make payments on our behalf when we experience a cash shortage. For the fiscal years ended June 30, 2024 and 2023,
the net cash transferred from the Company to the VIEs were RMB84,211,565 and RMB69,562,912, respectively. There was
no cash transferred from the VIEs to the Company or fees paid on behalf of the Company by the VIEs during the years ended June 30,
2024 and 2023. Neither we nor the VIEs have present plans to distribute earnings or settle amounts owed under the Contractual Agreements.
Cash in the VIEs are expected to be retained for business growth and operation. No dividends or distributions have been declared to pay
to us from our subsidiaries or the VIEs. No dividends or distributions were made to any U.S. investors.
We
are also subject to legal and operational risks associated with being based in and having the majority of the Company’s and VIEs’
operations in China. These risks may result in a material change in our operations, or a complete hindrance of our ability to offer or
continue to offer our securities to investors and could cause the value of our securities to significantly decline or become worthless.
Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little
advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies
listed overseas using variable interest entity structures, adopting new measures to extend the scope of cybersecurity reviews, and expanding
the efforts in anti-monopoly enforcement. On July 6, 2021, the General Office of the Communist Party of China Central Committee
and the General Office of the State Council jointly issued an announcement to crack down on illegal activities in the securities market
and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities
to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed
overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. On December 28,
2021, the PRC State Internet Information Office, along with 12 other authorities of the PRC, jointly issued a revised version of the
Cybersecurity Review Measures (the “CAC Revised Measures”). The CAC Revised Measures took effect on February 15, 2022,which
requires cyberspace operators with personal information of more than 1 million users who want to list abroad to file a cybersecurity
review with the Office of Cybersecurity Review. In addition, operators of critical information infrastructure purchasing network products
and services are also obligated to apply for the cybersecurity review for such purchasing activities. Furthermore, the Chinese education
sector is going through a series of reforms and new laws and guidelines have been recently promulgated and released to regulate our industry.
As of the date of this prospectus, these new laws and guidelines have not impacted the Company’s ability to conduct its business,
accept foreign investments, or list on a U.S. or other foreign exchange because the Company and the VIEs are not involved in the education
industry and do not maintain data of more than 1 million users; however, there are uncertainties in the interpretation and enforcement
of these new laws and guidelines, which could materially and adversely impact our business and financial outlook.
Our Securities may be prohibited to trade on a
national exchange or “over-the-counter” markets under the Holding Foreign Companies Accountable Act (the “HFCAA Act”)
if the Public Company Accounting Oversight Board (“PCAOB”) is unable to inspect our auditors for three consecutive years beginning
in 2021. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”)
and the U.S. House of Representatives introduced the AHFCAA on December 14, 2021 and referred to the House Committee on Financial
Services. On December 29, 2022, the Consolidated Appropriations Act was signed
into law. The Consolidated Appropriations Act contains, among other things, an identical provision to AHFCAA, which reduces the number
of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two.
Pursuant to the HFCAA, the PCAOB issued a Determination
Report on December 16, 2021 which found that the PCAOB is unable to inspect or investigate completely registered public accounting
firms headquartered in: (1) mainland China of the PRC, and (2) Hong Kong. In addition, the PCAOB’s report identified the
specific registered public accounting firms which are subject to these determinations. Our auditor, Enrome LLP is not subject to
the Determination Report issued on December 16, 2021.
The recent joint statement by the SEC and PCAOB,
proposed rule changes submitted by Nasdaq, and the HFCAA all call for additional and more stringent criteria to be applied to emerging
market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB.
These developments could add uncertainties to our offering.
On August 26, 2022, the PCAOB signed a Statement
of Protocol with the China Securities Regulatory Commission (“CSRC”) and the Ministry of Finance of the PRC, which sets out
specific arrangements on conducting inspections and investigations by both sides over relevant audit firms within the jurisdiction of
both sides, including the audit firms based in mainland China and Hong Kong. This agreement marks an important step towards resolving
the audit oversight issue that concern mutual interests, and sets forth arrangements for both sides to cooperate in conducting inspections
and investigations of relevant audit firms, and specifies the purpose, scope and approach of cooperation, as well as the use of information
and protection of specific types of data. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete
access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate
its previous determinations to the contrary. On December 29, 2022, the Consolidated Appropriations Act was signed into law. The Consolidated Appropriations
Act contains, among other things, an identical provision to AHFCAA, which reduces the number of consecutive non-inspection years required
for triggering the prohibitions under the HFCAA from three years to two.
On
February 17, 2023, the CSRC promulgated the Trial Measures and five supporting guidelines, which went into effect on March 31,
2023. Pursuant to Article 16 of the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly
and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working
days following its submission of initial public offerings or listing application. In addition, on February 24, 2023, the CSRC,
together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration
of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing
which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009,
or the Provisions. As advised by Jingtian & Gongcheng, our PRC counsel, we were not required to complete the filing procedures
pursuant to the Trial Measures for our initial public offering because we completed our initial public offering and listing prior to
September 30, 2023. However, we intend to conduct subsequent offerings in the U.S., and therefore, we are required to complete the
filing procedures with the CSRC pursuant to the requirements of the Trial Measures for each subsequent offering. These requirements specify
that when a listed issuer conducts subsequent offerings in the same stock market, the issuer shall fill with the CSRC within three working
days after such offering is completed.
As of the date of this prospectus, we have not received any formal inquiry, notice, warning, sanction, or objection from
the CSRC with respect to the initial offering. If a domestic company fails to complete required filing procedures or conceals any
material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative
penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly
in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. Any failure
or perceived failure of us to fully comply with such new regulatory requirements could significantly limit or completely hinder our
ability to offer or continue to offer securities to investors, cause significant disruption to our business operations, and severely
damage our reputation, which could materially and adversely affect our financial condition and results of operations and could cause
the value of our securities to significantly decline or be worthless.
Our auditor is currently subject to PCAOB
inspections, and the PCAOB is able to inspect our auditor. Our auditor, Enrome LLP, is headquartered in Singapore, has been
inspected by the PCAOB on a regular basis and subject to PCAOB inspection. Our auditor is not headquartered in mainland China or Hong Kong and
was not identified in this report as a firm subject to the PCAOB’s determination. Notwithstanding the foregoing, in the
future, if there is any regulatory change or step taken by PRC regulators that does not permit Enrome LLP to provide audit
documentations located in China or Hong Kong to the PCAOB for inspection or investigation, or the PCAOB expands the scope of the
Determination so that we are subject to the HFCAA Act, as the same may be amended, or if the agreement between the PCAOB and the
CSRC on August 26, 2022 does not succeed, you may be deprived of the benefits of such inspection which could result in
limitation or restriction to our access to the U.S. capital markets and trading of our securities, including trading on the national
exchange and trading on “over-the-counter” markets, may be prohibited under the HFCAA Act.
Investing in our securities involves a high
degree of risk. See “Risk Factors” on page 25 of this prospectus and in the documents incorporated by reference in this
prospectus, as updated in the applicable prospectus supplement, any related free writing prospectus and other future filings we make with
the Securities and Exchange Commission that are incorporated by reference into this prospectus, for a discussion of the factors you should
consider carefully before deciding to purchase our securities.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
Because there is no minimum number of securities
or minimum aggregate amount of proceeds for this offering to close, we may sell fewer than all of the securities offered hereby, and
investors in this offering will not receive a refund in the event that we do not sell an amount of securities sufficient to pursue the
business goals outlined in this prospectus. This offering may be closed without further notice to you and will terminate on the first
date that we enter into a placement agent agreement to sell the securities offered hereby. We expect to close the offering on [●],
2025 but the offering will be terminated by [●], 2025, provided that the closing of the offering has not occurred by such date,
and may not be extended. Because there is no escrow account and there is no minimum offering amount, investors could be in a position
where they have invested in our company, but we are unable to fulfill our objectives due to a lack of interest in this offering. Also,
any proceeds from the sale of securities offered by us will be available for our immediate use, despite uncertainty about whether we
would be able to use such funds to effectively implement our business plan.
We have engaged AC Sunshine Securities LLC (“ACSS”) as our placement agent in
connection with this offering. We refer to ACSS as the “placement agent” in this prospectus. The placement agent is not purchasing
or selling the securities offered by us, and is not required to arrange for the purchase or sale of any specific number or dollar amount
of our securities, but will use its reasonable best efforts to solicit offers to purchase the securities offered by this prospectus. The
securities will be offered at a fixed price and are expected to be issued in a single closing. Because there is no minimum offering amount
required as a condition to closing in this offering, the actual public offering amount, placement agent’s fees, and proceeds to
us, if any, are not presently determinable and may be substantially less than the total maximum offering amounts set forth above.
| |
|
Per
Share |
|
|
Total |
|
| Public offering
price |
|
$ |
[*] |
|
|
$ |
|
|
Placement agent fees (5%)(1) |
|
$ |
[*] |
|
|
$ |
|
|
| Proceeds, before expenses,
to us |
|
$ |
[*] |
|
|
$ |
|
|
| (1) | We have agreed to pay the placement agent a cash fee equal to 5.0%.
We have also agreed to reimburse the placement agent for certain of their offering-related expenses. See “Plan of Distribution”
beginning on page 52 of this prospectus for a description of the compensation to be received by the placement agent. |
Delivery of the securities is expected to
be made on or about , 2025, subject to customary closing
conditions.
Placement Agent
AC Sunshine Securities LLC
The date of this prospectus is [___], 2025.
Table of Contents
About
This Prospectus
You should rely only on the information contained
in this prospectus and the related exhibits, any prospectus supplement or amendment thereto and the documents incorporated by reference,
or to which we have referred you, before making your investment decision. We have not authorized anyone to provide you with information
that is different. We are offering to sell our securities, and seeking offers to buy our securities, only in jurisdictions where offers
and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time
of delivery of this prospectus or any sale of our securities.
This prospectus is part of a registration
statement on Form F-1 that we have filed with the Securities and Exchange Commission, or SEC. It omits some of the information contained
in the registration statement, and reference is made to the full registration statement for further information with regard to us and
the securities being offered by us. Any statement contained in the prospectus concerning the provisions of any document filed as an exhibit
to the registration statement or otherwise filed with the SEC is not necessarily complete, and in each instance, reference is made to
the copy of the document filed. You should review the complete document to evaluate these statements.
You should read this prospectus, any documents
that we incorporate by reference in this prospectus and the information below under the caption “Where You Can Find More Information”
and “Incorporation of Documents By Reference” before making an investment decision. You should rely only on the information
contained or incorporated by reference in this prospectus. We have not authorized any other person to provide you with different information.
If anyone provides you with additional, different or inconsistent information, you should not rely on it.
This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
You should not assume that the information in
this prospectus or any documents we incorporate by reference herein is accurate as of any date other than the date on the front of each
document. Our business, financial condition, results of operations and prospects may have changed since those dates.
This prospectus and the documents that are incorporated
by reference herein contain certain market data and industry statistics and forecasts that are based on studies sponsored by the Company
or third parties, independent industry publications and other publicly available information. Many of these statements involve risks and
uncertainties and are subject to change based on various factors, including those discussed under the caption “Risk Factors”
in this prospectus and under similar captions in the documents that are incorporated by reference herein. Accordingly, investors should
not place undue reliance on this information.
Unless the context otherwise requires,
all references in this prospectus to “Recon,” “we,” “us,” “our,” “the Company”
or similar words refer to Recon Technology, Ltd, a Cayman Island holding company, together with our subsidiaries, Recon Investment Ltd.
(“Recon-IN”), Recon Hengda Technology (Beijing) Co., Ltd. (“Recon-BJ”), Shandong Recon Renewable Resources
Technology Co., Ltd. (“Shandong Recon”), and Guangxi Recon Renewable Resources Technology Co., Ltd. (“Guangxi Recon”).
Separately, “VIEs” refers to the PRC variable interest entities and their subsidiaries (Beijing BHD Petroleum Technology Co., Ltd.
(“BHD”), Nanjing Recon Technology Co., Ltd. (“Nanjing Recon”), Future Gas Station (Beijing) Technology, Ltd.
(“FGS”), Gan Su BHD Environmental Technology Co. Ltd. (“Gan Su BHD”), Huang Hua BHD Petroleum Equipment Manufacturing
Co. Ltd. (“HH BHD”), and Qing Hai BHD New Energy Technology Co. Ltd. (“Qing Hai BHD”), respectively).
Prospectus
Summary
This summary highlights selected information
about us, this offering and information contained in greater detail elsewhere in this prospectus and in the documents incorporated by
reference herein. This summary is not complete and does not contain all of the information that you should consider before investing in
our securities. You should carefully read and consider this entire prospectus and the documents, including financial statements and related
notes, and information incorporated by reference into this prospectus, including the financial statements and “Risk Factors”
in this prospectus, before making an investment decision. If you invest in our securities, you are assuming a high degree of risk.
Company Overview
We are a Cayman Islands holding company with subsidiaries
established in the People’s Republic of China (“PRC” or “China”) and in the Hong Kong Special Administrative
Region of the People’s Republic of China (“HKSAR” or “Hong Kong”). Our subsidiaries have contractual arrangements
with PRC variable interest entities, or “VIEs,” and the VIEs’ subsidiaries. These VIEs are Chinese companies that provide
hardware, software, and on-site services to companies in the petroleum mining, extraction and sales of refined oil industry in the PRC.
To this end, our company and our subsidiaries, Recon Investment Ltd. (“Recon-IN”) and Recon Hengda Technology (Beijing) Co., Ltd.
(“Recon-BJ”) are contractually engaged with the following PRC VIE companies and their subsidiaries: Beijing BHD Petroleum
Technology Co., Ltd. (“BHD”), Future Gas Station (Beijing) Technology, Ltd. (“FGS”), Nanjing Recon Technology
Co., Ltd. (“Nanjing Recon”), Gan Su BHD Environmental Technology Co. Ltd. (“Gan Su BHD”), Huang Hua BHD Petroleum
Equipment Manufacturing Co. Ltd. (“HH BHD”), and Qing Hai BHD New Energy Technology Co. Ltd. (“Qing Hai BHD”)
(collectively, the “Domestic Companies”), which provide services designed to automate and enhance the extraction of and facilitate
the sale of petroleum products.
We entered into the waste plastic chemical recycling business through
two new wholly-owned subsidiaries, Shandong Recon Renewable Resources Technology Co., Ltd. (“Shandong Recon”) which was established
on October 10, 2023, and Guangxi Recon Renewable Resources Technology Co., Ltd. (“Guangxi Recon”) on February 22,
2024 through Recon-IN to serve customers located in Shandong and Guangxi provinces.
We believe that one of the most important advancements
in China’s petroleum industry has been the automation of significant segments of the exploration and extraction process. The Domestic
Companies’ automation products and services allow petroleum mining and extraction companies to reduce their labor requirements and
improve the productivity of oilfields. The Domestic Companies’ solutions allow our customers to locate productive oilfields more
easily and accurately, improve control over the extraction process, increase oil yield efficiency in tertiary stage oil recovery, and
improve the transportation of crude oil.
Recent Developments
Since the Company effected an one-for-eighteen
reverse share split on May 1, 2024, the Company received a letter dated May 22, 2024 from the Listing Qualifications Hearings Department
of Nasdaq notifying the Company that (i) the Company’s bid price deficiency had been cured and (ii) the Company was in
compliance with all applicable listing standards. Accordingly, the Compliance Letter provided that the Company’s scheduled hearing
had been determined to be moot and had been cancelled, and the Company’s ordinary shares will continue to be listed and traded
on The Nasdaq Capital Market. As previously reported, on April 27, 2023, Recon Technology Ltd. received a written notice (the “Initial
Notice”) from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”)
notifying the Company that for 30 consecutive business days preceding the date of the Notice, the bid price of the Company’s ordinary
shares had closed below the $1.00 per share minimum required for continued listing on The Nasdaq Capital Market pursuant to the Minimum
Bid Price Rule. The Company was provided 180 calendar days, or until October 24, 2023, to regain compliance with the Minimum Bid
Price Rule. On October 25, 2023, the Staff granted an additional 180 calendar days, or until April 22, 2024 to regain compliance
with the Minimum Bid Price Rule.
Additionally, as previously disclosed, on April 23,
2024 the Company received a subsequent written notice from the Staff indicating that the Staff had determined to delist the Company’s
securities from The Nasdaq Capital Market based upon the Company’s continued non-compliance with the $1.00 bid price requirement
unless the Company timely requested a hearing before the Nasdaq Hearings Panel. The Company timely requested a hearing before the Panel,
and a hearing was scheduled.
On March 29, 2024, the Company’s
shareholders approved to effect a reverse share split of the Company’s Class A Shares at the ratio of one-for-eighteen with
the market effective date of May 1, 2024 (the “2024 Reverse Split”). In connection with the 2024 Reverse Split, on March 29,
2024 the Company’s shareholders also approved and authorized the Company’s registered office service agent to file a Fourth
Amended and Restated Memorandum and Articles of Association with the Cayman Islands Registrar of Companies which included a change in
the Company’s authorized share capital ultimately from: US$15,725,000 divided into 150,000,000 Class A Ordinary Shares of
a nominal or par value of US$0.0925 each, and 20,000,000 Class B Ordinary Shares of a nominal or par value of US$0.0925 each, to:
US$58,000 divided into 500,000,000 Class A Ordinary Shares of a nominal or par value of US$0.0001 each and 80,000,000 Class B
Ordinary Shares of a nominal or par value of US$0.0001 each by way of (a) the 2024 Reverse Split; (b) the creation of additional
Class A Ordinary Shares and Class B Ordinary Shares; (b) a subdivision of all Shares at a ratio of 1-for- 17,349.9459325;
and (c) a capital reduction by way of the cancellation of certain authorised but unissued Class A Ordinary Shares (collectively,
the “2024 change in capital structure”).
On March 11, 2024, Recon announced two recently
awarded bids from a newly developed oilfield-industry customer for the supply of electronic components and materials used in oilfield
production. The total value of these contracts exceeds US$3 million and represents a significant milestone for the Company.
On March 4, 2024, the Company that it had
participated in the 2024 Plastics Recycling Conference in Grapevine, Texas. At the conference, Recon showcased its solutions
for low value plastic chemical recycling, including its solution on waste plastic collection and treatment, basic processing and techniques,
factory construction progress and expected production capacity, and main outputs of the process.
On
January 31, 2024, the Company entered into a securities purchase agreement, pursuant to which the Company agreed to sell securities
to various purchasers in a private placement transaction. Pursuant to the securities purchase agreement, the Company agreed to transfer,
assign, set over and deliver to the purchasers and the purchasers agree, severally and not jointly, to acquire from the Company in the
aggregate 100,000,000 of the Company’s Class A ordinary shares at USD$0.11 per share for USD$11,000,000. On February 2,
2024, the Company closed the private placement.
On December 14,
2023, the Company entered into a Warrant Purchase Agreement with certain accredited investors (the “Sellers”) pursuant to
which the Company agreed to buy back an aggregate of 17,953,269 warrants from the Sellers, and the Sellers agreed to sell the Warrants
back to the Company. These Warrants were sold to these Sellers in two previous transactions that closed on June 16, 2021, and March 14,
2023. The purchase price for each Warrant was $0.25, and the terms of each Warrant Purchase Agreement were substantially identical. Maxim
Group LLC acted as the exclusive advisor in connection with the Warrant Purchase Agreement between the Company and the Sellers. The Company
agreed that if the Company repurchased any other warrants prior to June 14, 2024 at a higher purchase price per Warrant than the
purchase price per Warrant stated in the Warrant Purchase Agreement, then the Company shall pay Sellers the difference between the purchase
prices per Warrant. Similarly, if the Company enters into or announces any Fundamental Transactions as defined in the Warrants, and the
Black-Scholes Value is a purchase price per Warrant that is higher than the purchase price per Warrant stated in the Warrant Purchase
Agreement, then the Company shall pay Sellers the difference between the Black-Scholes Value purchase price per Warrant and the stated
purchase price per Warrant in the Warrant Purchase Agreement.
Products and Services
The Domestic Companies
have historically provided products and services mainly to oil and gas field companies, which focus on the development and production
of oil and natural gas. The products and services described below correlate to the numbered stages of the oilfield production system graphical
expression shown below.
The following list shows
the Domestic Companies’ products and services. The first three items are covered by the (1) automation product and software
segment and (2) equipment and accessories segment. The last item is covered by the oilfield environmental protection segment.
Equipment for Oil and Gas Production
and Transportation
| · | High-Efficiency
Heating Furnaces (as shown above by process “3”). Crude petroleum contains certain
impurities that must be removed before the petroleum can be sold, including water and natural
gas. To remove the impurities and to prevent solidification and blockage in transport pipes,
companies employ heating furnaces. BHD researched, developed and implemented a new oilfield
furnace that is advanced, highly automated, reliable, easily operable, safe and highly heat-efficient
(90% efficiency). |
| · | Burner
(as shown above by process “5”). The burner BHD provides has the following characteristics:
high degree of automation; energy conservation; high turn-down ratio; high security and environmental
safety. |
Automation System
and Service
| · | Pumping
Unit Controller. Refers to process “1” above. Functions as a monitor to the pumping
unit, and also collects data for load, pressure, voltage, startup and shutdown control. |
| · | RTU
Used to Monitor Natural Gas Wells. Collects gas well pressure data. |
| · | Wireless
Dynamometer and Wireless Pressure Gauge. Refers to process “1” above. These products
replace wired technology with cordless displacement sensor technology. They are easy to install
and significantly reduce the working load associated with cable laying. |
| · | Electric
Multi-Way Valve for Oilfield Metering Station Flow Control. Refers to process “2”
above. This multi-way valve is used before the test separator to replace the existing three
valve manifolds. It facilitates the electronic control of the connection of the oil lead
pipeline with the separator. |
| · | Natural
Gas Flow Computer System. Flow computer system used in natural gas stations and gas distribution
stations to measure flow. |
| · | Recon
SCADA Oilfield Monitor and Data Acquisition System. Recon SCADA is a system which applies
to the oil well, measurement station, and the union station for supervision and data collection. |
| · | EPC
Service of Pipeline SCADA System. A service technique for pipeline monitoring and data acquisition
after crude oil transmission. |
| · | EPC
Service of Oil and Gas Wells SCADA System. A service technique for monitoring and data acquisition
of oil wells and natural gas wells. |
| · | EPC
Service of Oilfield Video Surveillance and Control System. A video surveillance technique
for controlling the oil and gas wellhead area and the measurement station area. |
| · | Technique
Service for “Digital Oilfield” Transformation. Includes engineering technique
services such as oil and gas SCADA system, video surveillance and control system and communication
systems. |
Waste Water and Oil Treatment Products
and Services
| |
· |
Oilfield sewage treatment. It is for oilfield waste water treatment solutions, related chemicals and onsite services customized to clients’ requirement. The Domestic Companies have also developed proprietary equipment and aim to manufacture in the future. |
| |
· |
Oily sludge disposal. This business line provides engineering services of oily sludge disposal in Gan Su province. |
| |
· |
Residual oil recovery service. This business line assists oilfield companies recover residual oils, including aged oil and spilled oil through our unique formula and equipment to enhance the profitability for oilfield companies. |
Platform Outsourcing Services: Intelligent
marketing system and digitalization solution for gas stations
| |
· |
Gas Station operation and management solution. This business provides new technical applications and data operations solutions and related services to gas stations of oil companies. It can also help gas stations export API ports to external parties for cooperation. |
New Business
Beginning in early calendar
year 2023, we have commenced a new business segment in the chemical recycling of low-value plastics. We have signed purchase intentions
with some multinational and local chemical companies, and based on these demands, we have started the construction of our plants. Beginning
in the second half of calendar year 2023, we purchased land and began applying for various access documents and construction permits.
We expect the plant to be ready for production and operation in early 2025.
Our Corporate
Structure
The following charts summarize our corporate
legal structure and identify our subsidiaries, the VIEs and their subsidiaries as of the date of this prospectus.
*51%
collectively owned.
Contractual Arrangements
Chinese laws and regulations
currently do not prohibit or restrict foreign ownership in petroleum businesses. However, Chinese laws and regulations do prevent direct
foreign investment in certain industries. In 2008, to protect our shareholders from possible future foreign ownership restrictions, Mr. Shenping Yin and Mr. Guangqiang Chen
(the “Founders”) signed a series of agreements with Recon-JN, BHD and Nanjing Recon, so Recon-JN became the primary beneficiary of BHD and Nanjing
Recon for accounting purposes.
On April 1, 2019,
as part of our planned organizational restructuring, Recon-BJ entered into a series of VIE agreements with BHD and Nanjing Recon, respectively,
under the same terms and conditions as that of the VIE agreements previously entered into by Recon-JN. As a result, the VIEs were effectively
transferred from Recon-JN to Recon-BJ.
Exclusive Technical
Consulting Service Agreement
Pursuant to the exclusive
technical consulting service agreement between Recon-BJ and each of BHD and Nanjing Recon dated April 1, 2019, Recon-BJ has the
exclusive right to provide each of BHD and Nanjing Recon with technical support services, consulting services and other services, including
granting use rights of intellectual property rights, software services, network support, database support, hardware services, technical
support, employee training, research and development of technology and market information, business management consulting, marketing
and promotion services, customer management and services, lease hardware and device, and the others necessary for each of BHD and Nanjing
Recon’s needs. In exchange, Recon-BJ is entitled to a service fee that equals 90% of the expected profits of BHD and Nanjing Recon.
Recon-BJ bears all the economic risk of losses. In addition to the services fee, each of BHD and Nanjing Recon may reimburse all reasonable
costs, reimbursed payments and out-of-pocket expenses, paid or incurred by Recon-BJ in connection with its performance.
Under the exclusive
technical consulting service agreement, without Recon-BJ’s prior written consent, each of BHD and Nanjing Recon agrees not to engage
in any transaction which may materially affect its asset, business, employment, obligation, right or operation.
The exclusive technical
consulting service agreement remains effective, unless terminated pursuant to the exclusive technical consulting service agreement or
upon the written notice of Recon-BJ. Recon-BJ, BHD, and Nanjing Recon have deferred their respective service fees because each of BHD
and Nanjing Recon have reported losses. Recon-BJ continues to accrue the payment obligations arising from the service fees. Above all
else, these certain contractual arrangements are in keeping with corporate formalities to distinguish our operations in connection with
Recon-BJ and the VIEs and their subsidiaries.
Exclusive Equity
Interest Purchase Agreement
Pursuant to the amended
and restated exclusive equity interest purchase agreement dated April 1, 2019, among Recon-BJ, each of BHD and Nanjing Recon and
the shareholder who owned all the equity interests of each of BHD and Nanjing Recon, such shareholders grant Recon-BJ an exclusive right
to purchase their equity interests in each of BHD and Nanjing Recon. The purchase price shall be the lowest price then permitted under
applicable PRC laws. Recon-BJ or its designated person may exercise such right at any time to purchase all or part of the equity interests
in each of BHD and Nanjing Recon until it has acquired all equity interests of each of BHD and Nanjing Recon, which is irrevocable during
the term of the agreement.
The amended and restated
exclusive equity interest purchase agreement remains in effect until all equity interests held by the shareholders have been transferred
or assigned to Recon-BJ and/or any other person designated by Recon-BJ. However, Recon-BJ has the right to terminate these agreements
unconditionally upon giving prior written notice to each of BHD and Nanjing Recon at any time.
Equity Interest Pledge
Agreement
Pursuant to the amended
and restated equity interest pledge agreement among the shareholders who owned all the equity interests of each of BHD and Nanjing Recon
dated April 1, 2019, such shareholders pledge all of the equity interests in each of BHD and Nanjing Recon to Recon-BJ as collateral
to secure the obligations of each of BHD and Nanjing Recon under the exclusive technical consulting service agreement and the amended
and restated exclusive equity interest purchase agreement. The shareholders of each of BHD and Nanjing Recon are prohibited or may not
transfer the pledged equity interests without prior consent of Recon-BJ unless transferring the equity interests to Recon-BJ or its designated
person in accordance with the amended and restated exclusive equity interest purchase agreement.
The amended and restated
equity interest pledge agreement shall come into force the date on which the pledged interests is recorded, under each of BHD and Nanjing
Recon’s register of shareholders and is registered with competent administration for industry and commerce of each of BHD and Nanjing
Recon until all of the liabilities and debts to Recon-BJ have been fulfilled completely by each of BHD and Nanjing Recon. Each of BHD
and Nanjing Recon and the shareholders who owned all the equity interest of each of BHD and Nanjing Recon shall not terminate this agreement
in any circumstance for any reason.
Shareholders’
Power of Attorney
Pursuant to the shareholders’
amended and restated power of attorney, all dated April 1, 2019, the shareholders of each of BHD and Nanjing Recon gives Recon-BJ
irrevocable proxies to act on their behaves on all matters pertaining to each of BHD and Nanjing Recon and to exercise all of their rights
as shareholders of each of BHD and Nanjing Recon, including the right to execute and deliver shareholder resolutions, to dispose any
or all equity interests, to nominate, elect, designate, or appoint officers and directors, to supervise company’s performance,
to approve submission of any registration documents, to attend shareholders meetings, to exercise voting rights and all of the other
rights, to take legal actions against the harmful actions by directors or officers, to approve the amendments to the articles of association
of the company, and any other rights under the articles of association of the company. The amended and restated power of attorney shall
remain in effect while the shareholders of each of BHD and Nanjing Recon hold the equity interests in each of BHD and Nanjing Recon.
Based on the foregoing
Contractual Arrangements, which authorize Recon-BJ to receive all of the VIEs’ expected residual returns, we account for each of
BHD and Nanjing Recon as a VIE. Accordingly, we consolidate the accounts of each of BHD and Nanjing Recon, in accordance with Regulation
S-X-3A-02 promulgated by the SEC and Accounting Standards Codification (“ASC”) 810-10, Consolidation.
Because we do not directly
hold equity interest in the VIEs, we are subject to risks due to uncertainty of the interpretation and the application of the PRC laws
and regulations, including limitation on foreign ownership of internet technology companies, regulatory review of oversea listing of
PRC companies through a special purpose vehicle, and the validity and enforcement of the VIE Agreements. We are also subject to the risks
of uncertainty about any future actions of the PRC government in this regard that could disallow the VIE structure, which would likely
result in a material change in our operations and the value of Class A Shares may depreciate significantly or become worthless.
Our Contractual Arrangements
have not been tested in a court of law and may be less effective in providing control over each of BHD and Nanjing Recon than direct
ownership. See “Risk Factors - We depend upon the Contractual Arrangements in conducting our business in China, which may not be
as effective as direct ownership in providing operational control.” for more details.
We may also be subject
to sanctions imposed by PRC regulatory agencies including the Chinese Securities Regulatory Commission, or CSRC, if we fail to comply
with their rules and regulations. See “Risk Factors — The approval of the China Securities Regulatory Commission and
other compliance procedures may be required in connection with this offering, and, if required, we cannot predict whether we will be
able to obtain such approval.” for more details.
We are subject to certain
legal and operational risks associated with the VIEs’ operations in China. PRC laws and regulations governing our current business
operations are sometimes vague and uncertain, and therefore, these risks may result in a material change in the VIEs’ operations,
significant depreciation of the value of our Class A Shares, or a complete hindrance of our ability to offer or continue to offer
our securities to investors. See “Risk Factors - We conduct our business through BHD, Nanjing Recon and their respective subsidiaries
by means of Contractual Arrangements. If the PRC courts or administrative authorities determine that these contractual arrangements
do not comply with applicable regulations, we could be subject to severe penalties and our business could be adversely affected. In addition,
changes in such PRC laws and regulations may materially and adversely affect our business.” Recently, the PRC government initiated
a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking
down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable
interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly
enforcement. Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation
making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified
or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation,
the ability to accept foreign investments and list on an U.S. exchange.
Permission Required
from the PRC Authorities for the VIEs’ Operation
We are currently not
required to obtain permission from any of the PRC authorities to operate and issue our Class A Shares to foreign investors. In addition,
we, our subsidiaries, or the VIEs are not required to obtain permission or approval from the PRC authorities including CSRC or Cyberspace
Administration of China for the VIEs’ operation, nor have we, our subsidiaries, or VIEs applied for or received any denial for
the VIEs’ operation. The General Office of the Central Committee of the Communist Party of China and the General Office of the
State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law” (the
“Opinions”), which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen
administration over illegal securities activities and the need to strengthen supervision with respect to overseas listings of Chinese
companies. The Opinions and any related implementing rules to be enacted may subject us to compliance requirements in the future.
Given the current regulatory environment in the PRC, we are still subject to the uncertainty of different interpretation and enforcement
of the rules and regulations in the PRC adverse to us, which may be announced or implemented with little or no advance notice. If
we were required to obtain approval in the future, any failure to obtain such approval may materially and adversely impact our results
of operations, may limit or completely hinder our ability to offer or continue to offer securities to investors, and/or may cause the
value of such securities to significantly decline or be worthless.
Under the VIE Agreements,
as a legal matter, if the VIEs or the Registered Shareholders fail to perform their respective obligations under the VIE Agreements,
we may have to incur substantial costs and expend significant resources to enforce those arrangements and resort to litigation or arbitration
and rely on legal remedies under PRC laws. These remedies may include seeking specific performance or injunctive relief and claiming
damages, any of which may not be effective. We may face challenges enforcing these contractual agreements due to legal uncertainties
and jurisdictional limits. It is uncertain whether we, as a Cayman Islands exempted limited company, would be able to enforce (directly
or through Recon-BJ) the VIE Agreements with the Domestic Companies in a court of law in China, either in in an action directly in China
or in seeking to enforce a foreign judgment in China. The costs of seeking to enforce such VIE Agreements could be substantial, and the
outcome of such litigation might not result in Recon enforcing such VIE Agreements. If such VIE Agreements were not enforced, investors
in Recon could see the value of their securities decrease in value or become worthless.
Transfer of Cash
in the VIEs
We are an exempted limited
company incorporated in the Cayman Islands. If we determine to pay dividends on any of our Class A Ordinary Shares in the future,
as an exempted limited company, we will be dependent on receipt of funds from our Wholly Foreign Owned Enterprise (“WFOE”).
A WFOE is a limited liability company based in the People’s Republic of China but wholly owned by foreign investors. In our instance,
Recon Hengda Technology (Beijing) Co., Ltd. (“Recon-BJ”) is a WFOE wholly owned by Recon Investment Ltd. (“Recon-IN”),
a Hong Kong limited company, which in turn is wholly owned by us.
Under the Exclusive
Technical Consultation and Service Agreements signed between Recon-BJ and the VIEs, Recon-BJ is entitled to 90% of the expected profits
of the VIEs in exchange for providing exclusive technical consulting services to the VIEs. Recon-BJ also bears all the economic risk
of losses. Current PRC regulations permit our indirect PRC subsidiaries to pay dividends to its shareholders only out of their accumulated
profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, according to the current
effective laws in Cayman Islands and Hong Kong, the resident companies could pay dividends to their shareholders. And there are no foreign
exchange restrictions on these two areas. Therefore, Recon-BJ can distribute the income obtained under the Contractual Arrangement to
Recon-IN in the form of dividends, with Recon-IN in turn distributing such revenues to us in the form of dividends, with we in turn would
distribute such revenues to U.S. investors in the form of dividends.
Each VIE has its
own operating cash flow. Cash flow between our Company and the VIEs primarily consists of transfers from us to the VIEs for supplemental
working capital, which is mainly used in purchase of materials and payment of operating expenses and investments. In addition, the VIEs
occasionally make payments on our behalf when we experience a cash shortage. For the fiscal years ended June 30, 2024 and 2023, the net
cash transferred from the Company to the VIEs were RMB84,211,565 and RMB69,562,912, respectively. There was no cash transferred from
the VIEs to the Company or fees paid on behalf of the Company by the VIEs during the years ended June 30, 2024 and 2023. Neither
we nor the VIEs have present plans to distribute earnings or settle amounts owed under the Contractual Agreements. Cash in the VIEs are
expected to be retained for business growth and operation. No dividends or distributions have been declared to pay to us from our subsidiaries
or the VIEs. No dividends or distributions were made to any U.S. investors. For a description of our corporate structure and VIE contractual
arrangements, see “Our Corporate Structure.” See also “Risk Factors – Risks Related to Our Corporate
Structure.”
U.S. Dollar as the Functional Currency
under FASB ASC 830-10-45-4
The functional currency
of the Company, as a Cayman Islands entity, is the U.S. Dollar. Management has determined that the intercompany receivable is denominated
in U.S. Dollars for several reasons: first, our functional currency (as the Cayman Islands entity) is the U.S. Dollar; and second, the
inter-company receivable is ultimately paid in U.S. Dollars. Although transactions involving the Domestic Companies may involve the RMB
from time to time, the transactions are ultimately denominated in U.S. Dollars to reflect our functional currency. For these reasons,
because our functional currency is the U.S. Dollar, and because the inter-company receivables are ultimately paid in U.S. Dollars, we
believe there are no exchange rate fluctuations as the parent company.
Foreign Exchange Risk
Our Domestic Companies,
and Recon-BJ classify the RMB as their functional currencies. Because our functional currency, as the Cayman Islands entity, is the U.S.
Dollar, we are exposed to foreign exchange risks from fluctuations with the exchange rates among the U.S. Dollar and the RMB. Notwithstanding
that Domestic Companies conduct operations and transactions in RMB, we ultimately believe that there should not be any U.S. Dollar/RMB
exchange rate fluctuations because the inter-company receivable is denominated in U.S. Dollars. Thus, the transactions and operations
reported by the Domestic Companies are ultimately paid in U.S. Dollars as the inter-company receivables, which reflect our functional
currency in U.S. Dollars as the parent company. See “Risk Factors – Risks Related to Our Corporate Structure - There
are possible economic risks posed by foreign exchange rate fluctuations between the U.S. Dollar and RMB.”
Select Condensed
Financial Statements on Consolidated VIEs
The following table
below provides a condensed consolidating schedule depicting the financial position, cash flows, and results of operations for the parent,
the consolidated VIEs, and any eliminating adjustments separately as of the same dates and for the same periods for which audited consolidated
financial statements are required.
SELECTED UNAUDITED CONDENSED
CONSOLIDATING STATEMENTS OF OPERATIONS
| | |
For
the Year Ended June 30, 2024 | |
| | |
Recon | | |
| | |
| | |
| | |
| |
| | |
Technology, | | |
| | |
| | |
| | |
| |
| | |
Ltd. | | |
| | |
| | |
| | |
| |
| | |
(Cayman | | |
“Non-VIE Subsidiaries | | |
VIEs and VIE’s | | |
| | |
Consolidated | |
| | |
Islands) | | |
(Hong Kong and PRC)” | | |
subsidiaries (PRC) | | |
Eliminations | | |
Total | |
| Revenue | |
¥ | — | | |
¥ | — | | |
¥ | 68,854,280 | | |
¥ | — | | |
¥ | 68,854,280 | |
| Cost of Revenue | |
| — | | |
| 135,705 | | |
| 47,841,131 | | |
| — | | |
| 47,976,836 | |
| Gross
Profit | |
| — | | |
| (135,705 | ) | |
| 21,013,149 | | |
| — | | |
| 20,877,444 | |
| Operating
expenses | |
| 44,012,602 | | |
| 3,200,926 | | |
| 45,301,827 | | |
| — | | |
| 92,515,355 | |
| Loss
from operations | |
| (44,012,602 | ) | |
| (3,336,631 | ) | |
| (24,288,678 | ) | |
| — | | |
| (71,637,911 | ) |
| Other
income (expenses), net | |
| 16,452,789 | | |
| (778,939 | ) | |
| 4,528,251 | | |
| — | | |
| 20,202,101 | |
| Loss
from subsidiaries | |
| — | | |
| (18,195,846 | ) | |
| — | | |
| 18,195,846 | | |
| — | |
| Loss
from VIEs | |
| (22,311,446 | ) | |
| — | | |
| — | | |
| 22,311,446 | | |
| — | |
| Income
tax expenses | |
| — | | |
| 30 | | |
| — | | |
| — | | |
| 30 | |
| Net
loss | |
| (49,871,259 | ) | |
| (22,311,446 | ) | |
| (19,760,427 | ) | |
| 40,507,292 | | |
| (51,435,840 | ) |
| Non-controlling
interest | |
| — | | |
| — | | |
| (1,564,581 | ) | |
| — | | |
| (1,564,581 | ) |
| Net
Loss Attributable to Recon Technology, Ltd | |
¥ | (49,871,259 | ) | |
¥ | (22,311,446 | ) | |
¥ | (18,195,846 | ) | |
¥ | 40,507,292 | | |
¥ | (49,871,259 | ) |
| | |
For
the Year Ended June 30, 2023 | |
| | |
Recon | | |
| | |
| | |
| | |
| |
| | |
Technology, | | |
| | |
| | |
| | |
| |
| | |
Ltd. | | |
| | |
| | |
| | |
| |
| | |
(Cayman | | |
“Non-VIE Subsidiaries | | |
VIEs and VIE’s | | |
| | |
Consolidated | |
| | |
Islands) | | |
(Hong
Kong and PRC)” | | |
subsidiaries
(PRC) | | |
Eliminations | | |
Total | |
| Revenue | |
¥ | — | | |
¥ | — | | |
¥ | 67,114,378 | | |
¥ | — | | |
¥ | 67,114,378 | |
| Cost of Revenue | |
| — | | |
| — | | |
| 48,247,395 | | |
| — | | |
| 48,247,395 | |
| Gross
Profit | |
| — | | |
| — | | |
| 18,866,983 | | |
| — | | |
| 18,866,983 | |
| Operating
expenses | |
| 50,352,631 | | |
| 1,343,355 | | |
| 36,503,732 | | |
| — | | |
| 88,199,718 | |
| Loss
from operations | |
| (50,352,631 | ) | |
| (1,343,355 | ) | |
| (17,636,749 | ) | |
| — | | |
| (69,332,735 | ) |
| Other
income (expenses), net | |
| 16,224,783 | | |
| 343,437 | | |
| (8,693,538 | ) | |
| — | | |
| 7,874,682 | |
| Loss
from subsidiaries | |
| — | | |
| (24,039,535 | ) | |
| — | | |
| 24,039,535 | | |
| — | |
| Loss
from VIEs | |
| (25,039,453 | ) | |
| — | | |
| — | | |
| 25,039,453 | | |
| — | |
| Income
tax expenses | |
| — | | |
| — | | |
| 18,339 | | |
| — | | |
| 18,339 | |
| Net
loss | |
| (59,167,301 | ) | |
| (25,039,453 | ) | |
| (26,348,626 | ) | |
| 49,078,988 | | |
| (61,476,392 | ) |
| Non-controlling
interest | |
| — | | |
| — | | |
| (2,309,091 | ) | |
| — | | |
| (2,309,091 | ) |
| Net
Loss Attributable to Recon Technology, Ltd | |
¥ | (59,167,301 | ) | |
¥ | (25,039,453 | ) | |
¥ | (24,039,535 | ) | |
¥ | 49,078,988 | | |
¥ | (59,167,301 | ) |
SELECTED
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS
| | |
As
of June 30, 2024 | |
| | |
Recon | | |
| | |
| | |
| | |
| |
| | |
Technology, | | |
| | |
| | |
| | |
| |
| | |
Ltd. | | |
| | |
| | |
| | |
| |
| | |
(Cayman | | |
Non-VIE Subsidiaries | | |
VIEs and VIE’s | | |
| | |
Consolidated | |
| | |
Islands) | | |
(Hong
Kong and PRC) | | |
subsidiaries
(PRC) | | |
Eliminations | | |
Total | |
| Cash
and cash equivalents | |
¥ | 16,473,018 | | |
¥ | 58,161,122 | | |
¥ | 35,357,534 | | |
¥ | — | | |
¥ | 109,991,674 | |
| Restricted
cash | |
| — | | |
| — | | |
| 848,936 | | |
| — | | |
| 848,936 | |
| Short-term
investments | |
| 88,091,794 | | |
| — | | |
| — | | |
| — | | |
| 88,091,794 | |
| Other
current assets | |
| 170,158,947 | | |
| 13,263,107 | | |
| 125,157,390 | | |
| — | | |
| 308,579,444 | |
| Intercompany
receivables | |
| 375,736,992 | | |
| 157,821,815 | | |
| — | | |
| (533,558,807 | ) | |
| — | |
| Total
current assets | |
| 650,460,751 | | |
| 229,246,044 | | |
| 161,363,860 | | |
| (533,558,807 | ) | |
| 507,511,848 | |
| Investments
in subsidiaries and VIEs | |
| (145,408,577 | ) | |
| — | | |
| — | | |
| 145,408,577 | | |
| — | |
| Benefits
through VIEs and VIE’s subsidiaries | |
| — | | |
| (129,879,588 | ) | |
| — | | |
| 129,879,588 | | |
| — | |
| Other
non-current assets | |
| — | | |
| 15,044,379 | | |
| 29,833,287 | | |
| — | | |
| 44,877,666 | |
| Total
non-current assets | |
| (145,408,577 | ) | |
| (114,835,209 | ) | |
| 29,833,287 | | |
| 275,288,165 | | |
| 44,877,666 | |
| Total
Assets | |
| 505,052,174 | | |
| 114,410,835 | | |
| 191,197,147 | | |
| (258,270,642 | ) | |
| 552,389,514 | |
| Intercompany
payables | |
| — | | |
| 264,135,617 | | |
| 269,423,190 | | |
| (533,558,807 | ) | |
| — | |
| Other
liabilities and accrued liabilities | |
| 2,497,637 | | |
| 432,795 | | |
| 58,525,185 | | |
| — | | |
| 61,455,617 | |
| Total Liabilities | |
| 2,497,637 | | |
| 264,568,412 | | |
| 327,948,375 | | |
| (533,558,807 | ) | |
| 61,455,617 | |
| Class A ordinary share, $0.0001 U.S. dollar par value, 500,000,000 shares authorized; 2,306,295 shares and 7,987,959 shares issued and outstanding as of June 30, 2023 and June 30, 2024, respectively* | |
| 99,634 | | |
| — | | |
| — | | |
| — | | |
| 99,634 | |
| Class B ordinary share, $0.0001 U.S. dollar par value, 80,000,000 shares authorized; 7,100,000 shares and 7,100,000 shares issued and outstanding as of June 30, 2023 and June 30, 2024, respectively* | |
| 4,693 | | |
| — | | |
| — | | |
| — | | |
| 4,693 | |
| Additional paid-in
capital | |
| 681,476,717 | | |
| — | | |
| 4,749,000 | | |
| (4,749,000 | ) | |
| 681,476,717 | |
| Retained earnings | |
| (216,163,156 | ) | |
| (125,967,252 | ) | |
| (112,989,285 | ) | |
| 238,956,537 | | |
| (216,163,156 | ) |
| Accumulated
other comprehensive income | |
| 37,136,649 | | |
| (24,190,325 | ) | |
| (16,890,303 | ) | |
| 41,080,628 | | |
| 37,136,649 | |
| Total
Shareholders’ Equity | |
| 502,554,537 | | |
| (150,157,577 | ) | |
| (125,130,588 | ) | |
| 275,288,165 | | |
| 502,554,537 | |
| Non-controlling
interests | |
| — | | |
| — | | |
| (11,620,640 | ) | |
| — | | |
| (11,620,640 | ) |
| Total
Liabilities and Equity | |
¥ | 505,052,174 | | |
¥ | 114,410,835 | | |
¥ | 191,197,147 | | |
¥ | (258,270,642 | ) | |
¥ | 552,389,514 | |
* Retrospectively restated for the 1-for-18 reverse share split
on May 1, 2024 and change in capital structure on March 29, 2024.
| | |
As
of June 30, 2023 | |
| | |
Recon | | |
| | |
| | |
| | |
| |
| | |
Technology, | | |
| | |
| | |
| | |
| |
| | |
Ltd. | | |
| | |
| | |
| | |
| |
| | |
(Cayman | | |
Non-VIE Subsidiaries | | |
VIEs and VIE’s | | |
| | |
Consolidated | |
| | |
Islands) | | |
(Hong
Kong and PRC) | | |
subsidiaries
(PRC) | | |
Eliminations | | |
Total | |
| Cash
and cash equivalents | |
¥ | 54,864,089 | | |
¥ | 11,600,593 | | |
¥ | 37,661,118 | | |
¥ | — | | |
¥ | 104,125,800 | |
| Restricted
cash | |
| — | | |
| — | | |
| 731,545 | | |
| — | | |
| 731,545 | |
| Short-term
investments | |
| 184,184,455 | | |
| — | | |
| — | | |
| — | | |
| 184,184,455 | |
| Other
current assets | |
| 77,134,062 | | |
| 35,567 | | |
| 138,201,744 | | |
| — | | |
| 215,371,373 | |
| Intercompany
receivables | |
| 291,525,426 | | |
| 156,313,805 | | |
| — | | |
| (447,839,231 | ) | |
| — | |
| Total
current assets | |
| 607,708,032 | | |
| 167,949,965 | | |
| 176,594,407 | | |
| (447,839,231 | ) | |
| 504,413,173 | |
| Investments
in subsidiaries and VIEs | |
| (122,920,490 | ) | |
| — | | |
| — | | |
| 122,920,490 | | |
| — | |
| Benefits
through VIEs and VIE’s subsidiaries | |
| — | | |
| (111,196,475 | ) | |
| — | | |
| 111,196,475 | | |
| — | |
| Other
non-current assets | |
| — | | |
| — | | |
| 27,411,404 | | |
| — | | |
| 27,411,404 | |
| Total
non-current assets | |
| (122,920,490 | ) | |
| (111,196,475 | ) | |
| 27,411,404 | | |
| 234,116,965 | | |
| 27,411,404 | |
| Total
Assets | |
| 484,787,542 | | |
| 56,753,490 | | |
| 204,005,811 | | |
| (213,722,266 | ) | |
| 531,824,577 | |
| Intercompany
payables | |
| — | | |
| 183,903,309 | | |
| 263,935,922 | | |
| (447,839,231 | ) | |
| — | |
| Other
liabilities and accrued liabilities | |
| 35,580,580 | | |
| 519,671 | | |
| 56,573,423 | | |
| 92,673,674 | | |
| — | |
| Total Liabilities | |
| 35,580,580 | | |
| 184,422,980 | | |
| 320,509,345 | | |
| (447,839,231 | ) | |
| 92,673,674 | |
| Class A ordinary share, $0.0001 U.S. dollar par value, 500,000,000 shares authorized; 1,704,766 shares and 2,306,295 shares issued and outstanding
as of June 30, 2022 and June 30, 2023, respectively* | |
| 26,932 | | |
| — | | |
| — | | |
| — | | |
| 26,932 | |
| Class B ordinary share, $0.0001 U.S. dollar par value, 80,000,000 shares authorized; 4,100,000 shares and 7,100,000 shares issued and outstanding
as of June 30, 2022 and June 30, 2023, respectively* | |
| 4,693 | | |
| — | | |
| — | | |
| — | | |
| 4,693 | |
| Additional paid-in
capital | |
| 580,340,061 | | |
| — | | |
| 4,749,000 | | |
| (4,749,000 | ) | |
| 580,340,061 | |
| Retained earnings | |
| (166,291,897 | ) | |
| (103,655,803 | ) | |
| (94,793,438 | ) | |
| 198,449,241 | | |
| (166,291,897 | ) |
| Accumulated
other comprehensive income | |
| 35,127,173 | | |
| (24,013,687 | ) | |
| (16,403,037 | ) | |
| 40,416,724 | | |
| 35,127,173 | |
| Total
Shareholders’ Equity | |
| 449,206,962 | | |
| (127,669,490 | ) | |
| (106,447,475 | ) | |
| 234,116,965 | | |
| 449,206,962 | |
| Non-controlling
interests | |
| — | | |
| — | | |
| (10,056,059 | ) | |
| — | | |
| (10,056,059 | ) |
| Total
Liabilities and Equity | |
¥ | 484,787,542 | | |
¥ | 56,753,490 | | |
¥ | 204,005,811 | | |
¥ | (213,722,266 | ) | |
¥ | 531,824,577 | |
*Retrospectively restated for the 1-for-18
reverse share split on May 1, 2024 and change in capital structure on March 29, 2024.
SELECTED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | |
For
the Year Ended June 30, 2024 | |
| | |
Recon | | |
| | |
| | |
| | |
| |
| | |
Technology, | | |
| | |
| | |
| | |
| |
| | |
Ltd. | | |
Subsidiaries | | |
| | |
| | |
| |
| | |
(Cayman | | |
(Hong Kong | | |
| | |
| | |
Consolidated | |
| | |
Islands) | | |
and
PRC) | | |
VIE
(PRC) | | |
Eliminations | | |
Total | |
| Net
cash used in operating activities | |
¥ | (5,802,631 | ) | |
¥ | (9,255,014 | ) | |
¥ | (28,690,288 | ) | |
| — | | |
¥ | (43,747,933 | ) |
| Net cash provided
by (used in) investing activities | |
| (261,267,638 | ) | |
| (23,219,383 | ) | |
| 203,260,432 | | |
| 84,211,565 | | |
| 2,984,976 | |
| Net cash provided
by financing activities | |
| 45,094,034 | | |
| 78,724,299 | | |
| 5,417,289 | | |
| (84,211,565 | ) | |
| 45,024,057 | |
| Effect
of exchange rate fluctuation on cash and cash equivalents | |
| 2,302,664 | | |
| 310,627 | | |
| (891,126 | ) | |
| — | | |
| 1,722,165 | |
| Net
change in cash | |
| (219,673,571 | ) | |
| 46,560,529 | | |
| 179,096,307 | | |
| — | | |
| 5,983,265 | |
| Opening
cash balance | |
| 236,146,589 | | |
| 11,600,593 | | |
| (142,889,837 | ) | |
| — | | |
| 104,857,345 | |
| Restricted
cash | |
| — | | |
| — | | |
| 848,936 | | |
| — | | |
| 848,936 | |
| Ending cash
balance | |
¥ | 16,473,018 | | |
¥ | 58,161,122 | | |
¥ | 35,357,534 | | |
| — | | |
¥ | 109,991,674 | |
| |
|
For
the Year Ended June 30, 2023 |
|
| |
|
Recon |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Technology, |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Ltd. |
|
|
Subsidiaries |
|
|
|
|
|
|
|
|
|
|
| |
|
(Cayman |
|
|
(Hong
Kong |
|
|
|
|
|
|
|
|
Consolidated |
|
| |
|
Islands) |
|
|
and PRC) |
|
|
VIE
(PRC) |
|
|
Eliminations |
|
|
Total |
|
| Net
cash used in operating activities |
|
¥ |
(22,888,678 |
) |
|
¥ |
(964,905 |
) |
|
¥ |
(27,834,748 |
) |
|
|
— |
|
|
¥ |
(51,688,331 |
) |
| Net
cash used in investing activities |
|
|
(314,716,414 |
) |
|
|
|
|
|
|
(16,808,723 |
) |
|
|
86,300,464 |
|
|
|
(245,224,673 |
) |
| Net
cash provided by financing activities |
|
|
49,418,344 |
|
|
|
16,737,550 |
|
|
|
76,527,843 |
|
|
|
(86,300,464 |
) |
|
|
56,383,273 |
|
| Effect
of exchange rate fluctuation on cash and cash equivalents |
|
|
46,211,878 |
|
|
|
(6,274,284 |
) |
|
|
(12,248,935 |
) |
|
|
— |
|
|
|
27,688,659 |
|
| Net
change in cash |
|
|
(241,974,870 |
) |
|
|
9,498,361 |
|
|
|
19,635,437 |
|
|
|
— |
|
|
|
(212,841,072 |
) |
| Opening
cash balance |
|
|
296,838,959 |
|
|
|
2,102,232 |
|
|
|
18,757,226 |
|
|
|
— |
|
|
|
317,698,417 |
|
| Restricted
cash |
|
|
— |
|
|
|
— |
|
|
|
731,545 |
|
|
|
— |
|
|
|
731,545 |
|
| Ending
cash balance |
|
¥ |
54,864,089 |
|
|
¥ |
11,600,593 |
|
|
¥ |
37,661,118 |
|
|
|
— |
|
|
¥ |
104,125,800 |
|
VIEs are generally entities that lack sufficient equity to finance
their activities without additional financial support from other parties or whose equity holders lack adequate decision-making ability.
All VIEs and their subsidiaries with which the Company is involved must be evaluated to determine the primary beneficiary of the risks
and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.
The nature of any assets,
operations and cash flows that exist or which occur outside of the VIEs are mainly about:
| · | The daily operations of us, as the parent company, to maintain the basic functions as a holding entity
such as the purchase of materials and payment of operating expenses and investments, in order to realize the control of our subsidiaries
and the VIEs to ensure that the overall company’s business objectives are fulfilled. The main resource to finance these activities
are cash from securities offerings. |
| · | There are some businesses or projects which are signed by us, as the parent company, and then subsequently
outsourced from us to the VIEs, as practical, particularly overseas projects. Generally, we would bid for projects based in China or from
other countries. If we win the bid, we sign the agreement and then assign and outsource the projects to the VIEs such as BHD and Nanjing
to implement and complete the project. |
Our basic functions include
but not limited to: 1) research and improve the Company’s development strategy based on the Company’s industry and market
trends; 2) financing, funding, budgeting and complete oversight of the Company and the VIEs’ safety and efficiencies in the use
of funds and assets; and 3) decision-making on major acquisitions.
Our current business
objective is to grow both in scale and revenue. Over the longer term, our objective is to improve our business structure and achieve net
profits.
Summary information regarding
consolidated VIEs and their subsidiaries is as follows:
| | |
June 30, 2023 | | |
June 30, 2024 | | |
June 30, 2024 | |
| | |
RMB | | |
RMB | | |
US Dollars | |
| ASSETS | |
| | | |
| | | |
| | |
| Current
Assets | |
| | | |
| | | |
| | |
| Cash | |
¥ | 37,661,118 | | |
¥ | 35,357,534 | | |
$ | 4,865,359 | |
| Restricted cash | |
| 731,545 | | |
| 848,936 | | |
| 116,817 | |
| Notes receivable | |
| 3,742,390 | | |
| 1,341,820 | | |
| 184,641 | |
| Accounts receivable,
net | |
| 27,453,415 | | |
| 38,631,762 | | |
| 5,315,907 | |
| Inventories,
net | |
| 6,330,701 | | |
| 1,128,912 | | |
| 155,343 | |
| Other receivables,
net | |
| 11,618,275 | | |
| 3,514,776 | | |
| 483,649 | |
| Loans to third
parties | |
| 37,770,188 | | |
| 31,008,330 | | |
| 4,266,888 | |
| Purchase advances,
net | |
| 1,592,761 | | |
| 30,691 | | |
| 4,223 | |
| Contract costs,
net | |
| 49,572,685 | | |
| 48,335,817 | | |
| 6,651,230 | |
| Prepaid expenses | |
| 121,329 | | |
| 138,683 | | |
| 19,083 | |
| Operating
lease right-of-use assets, net - current | |
| — | | |
| 1,026,599 | | |
| 141,265 | |
| Total current
assets | |
| 176,594,407 | | |
| 161,363,860 | | |
| 22,204,405 | |
| | |
| | | |
| | | |
| | |
| Property and
equipment, net | |
| 24,752,864 | | |
| 22,137,940 | | |
| 3,046,282 | |
| Long-term other
receivables, net | |
| 3,640 | | |
| — | | |
| — | |
| Operating
lease right-of-use assets, net - non-current | |
| 2,654,900 | | |
| 7,695,347 | | |
| 1,058,915 | |
| Total
Assets | |
¥ | 204,005,811 | | |
¥ | 191,197,147 | | |
$ | 26,309,602 | |
| | |
| | | |
| | | |
| | |
| LIABILITIES | |
| | | |
| | | |
| | |
| Short-term bank
loans | |
¥ | 12,451,481 | | |
¥ | 12,425,959 | | |
$ | 1,709,869 | |
| Accounts payable | |
| 10,791,721 | | |
| 10,187,518 | | |
| 1,401,849 | |
| Other payables | |
| 3,904,135 | | |
| 1,160,065 | | |
| 159,630 | |
| Other payable-
related parties | |
| 1,356,915 | | |
| 2,252,236 | | |
| 309,918 | |
| Contract liabilities | |
| 2,748,361 | | |
| 1,820,481 | | |
| 250,507 | |
| Accrued payroll
and employees’ welfare | |
| 1,048,061 | | |
| 2,030,300 | | |
| 279,379 | |
| Intercompany
payables* | |
| 263,935,922 | | |
| 269,423,190 | | |
| 37,073,865 | |
| Taxes payable | |
| 1,163,237 | | |
| 933,219 | | |
| 128,415 | |
| Short-term borrowings
- related parties | |
| 20,018,222 | | |
| 10,002,875 | | |
| 1,376,441 | |
| Operating
lease liabilities - current | |
| 3,066,146 | | |
| 3,741,247 | | |
| 514,812 | |
| Total current
liabilities | |
| 320,484,201 | | |
| 313,977,090 | | |
| 43,204,685 | |
| | |
| | | |
| | | |
| | |
| Operating lease
liabilities - non-current | |
| 25,144 | | |
| 3,971,285 | | |
| 546,467 | |
| Long-term
borrowings - related party | |
| — | | |
| 10,000,000 | | |
| 1,376,046 | |
| Total
Liabilities | |
¥ | 320,509,345 | | |
¥ | 327,948,375 | | |
$ | 45,127,198 | |
Corporate Information
Our principal executive offices are located at
Room 601, No. 1 Shui’an South Street, Chaoyang District, Beijing, 100012, People’s Republic of China. Our telephone number
at this address is +86 (10) 8494-5799. Our Class A Shares are traded on the NASDAQ Capital Market under the symbol “RCON.”
Our Internet website, www.recon.cn, provides a
variety of information about our Company. We do not incorporate by reference into this prospectus the information on, or accessible through,
our website, and you should not consider it as part of this prospectus. Our annual reports on Form 20-F and current reports on Form 6-K
filed with the SEC are available, as soon as practicable after filing, at the investors’ page on our corporate website, or
by a direct link to its filings on the SEC’s free website.
Summary of Risk Factors
Investing in our Shares involves significant risks.
You should carefully consider all of the information in this prospectus and the filings incorporated by reference before making an investment
in our Securities. Below please find a summary of the principal risks we face, organized under relevant headings. These risks are discussed
more fully in the section titled “Risk Factors.”
Risks Related to Doing Business in China
We are based in China and have the majority of
our operations in China, so we face risks and uncertainties related to doing business in China in general, including, but not limited
to, the following:
| |
· |
Adverse changes in political, economic and other policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could materially and adversely affect the growth of our business and our competitive position. |
| |
|
|
| |
· |
Uncertainties with respect to the PRC legal system could have a material adverse effect on us. |
| |
|
|
| |
· |
China’s economic, political and social conditions, as well as changes in any government policies, laws and regulations, could have a material adverse effect on our business. |
| |
|
|
| |
· |
The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. |
| |
|
|
| |
· |
The Chinese government may intervene or influence our operations at any time. See “Risk Factors – Risks Related to Doing Business in China – The recent state government interference into business activities on U.S. listed Chinese companies may negatively impact our existing and future operations in China.” |
| |
|
|
| |
· |
In light of recent events indicating greater oversight by the Cyberspace Administration of China over data security, particularly for companies listed or seeking to list on a foreign exchange, we may be subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our continued listing on Nasdaq, financial condition, and results of operations. |
| |
|
|
| |
· |
PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to personal liability and limit our ability to acquire PRC companies or to inject capital into our PRC subsidiary, limit our PRC subsidiary ability to distribute profits to us, or otherwise materially and adversely affect us. |
| |
|
|
| |
· |
You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China against us or our management named in the prospectus based on Hong Kong or other foreign laws, and the ability of U.S. authorities to bring actions in China may also be limited. |
| |
|
|
| |
· |
Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment and/or operations in China-based issuers could significantly change our operations, limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. See “Our Corporate Structure – Contractual Arrangements – Permission Required from the PRC Authorities for the VIEs’ Operation,” and “Risk Factors – Risk Related to Doing Business In China – The Chinese government exerts substantial influence over the manner in which we must conduct our business activities and may intervene or influence our operations at any time, which could result in a material change in our operations and the value of our Class A Ordinary Shares.” |
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Rules and regulations in China can change quickly with little or no advance notice and their interpretation and the implementation involve uncertainty. See “Our Corporate Structure – Contractual Arrangements –Permission Required from the PRC Authorities for the VIEs’ Operation” under “Contractual Arrangements,” and “Risk Factors – Risks Related to Doing Business in China – PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitably.” |
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Under the PRC Enterprise Income Tax Law, or the EIT Law, we may be classified as a “resident enterprise” of China, which could result in unfavorable tax consequences to us and our non-PRC shareholders. See “Risk Factors – Risks Related to Doing Business in China - Under the PRC Enterprise Income Tax Law, or the EIT Law, we may be classified as a “resident enterprise” of China, which could result in unfavorable tax consequences to us and our non-PRC shareholders.” |
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If our public accounting firm does not permit the Public Company Accounting Oversight Board (“PCAOB”) to inspect it within three years pursuant to the Holding Foreign Companies Accountable Act, we may be delisted. |
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The PRC government may issue further restrictive measures in the future. |
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We may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption law. |
| · | We
may be subject to a variety of laws and other obligations regarding cybersecurity and data
protection, and any failure to comply with applicable laws and obligations could have a material
and adverse effect on our business, financial condition and results of operations. |
| | | |
| · | It
may be difficult for overseas shareholders and/or regulators to conduct investigation or
collect evidence within China. |
| | | |
| · | Failure
to comply with laws and regulations applicable to our business in China could subject us
to fines and penalties and could also cause us to lose customers or otherwise harm our business. |
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| · | The
recent joint statement by the SEC, proposed rule changes submitted by NASDAQ, and an
act passed by the U.S. Senate and the U.S. House of Representatives, all call for additional
and more stringent criteria to be applied to emerging market companies. These developments
could add uncertainties to our future offerings, business operations share price and reputation. |
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| · | NASDAQ
may apply additional and more stringent criteria for our continued listing. |
Risks Related to our Corporate Structure
In addition to the risks described above, we
are subject to general risks and uncertainties related to our Class A Shares and our organizational structure, including, but not
limited to, the following:
| · | We
depend upon the Contractual Arrangements in conducting our business in China, which may not
be as effective as direct ownership in providing operational control. |
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| · | We
conduct our business through BHD, Nanjing Recon and their respective subsidiaries by means
of Contractual Arrangements. These agreements have not been tested in a court of law. If
the PRC courts or administrative authorities determine that these contractual arrangements
do not comply with applicable regulations, we could be subject to severe penalties and our
business could be adversely affected. In addition, changes in such PRC laws and regulations
may materially and adversely affect our business. |
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| · | Any
future issuances of Class B Ordinary Shares may be dilutive to the voting power of Class A
Ordinary Shareholders. |
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| · | The
dual class structure of our ordinary shares has the effect of concentrating voting control
with holders of Class B ordinary shares. |
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| · | Recent
joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq,
and an act passed by the US Senate all call for additional and more stringent criteria to
be applied to emerging market companies upon assessing the qualification of their auditors.
These developments could add uncertainties to our offering. |
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| · | Our
Class B ordinary shares have stronger voting power than our Class A ordinary shares
and certain existing shareholders have substantial influence over our Company and their interests
may not be aligned with the interests of our other shareholders. |
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| · | Trading
in our securities may be prohibited under the Holding Foreign Companies Accountable Act if
the PCAOB determines that it cannot inspect or fully investigate our auditor, and that as
a result an exchange may determine to delist our securities. Our auditor, Enrome LLP is not
subject to the determinations announced by the PCAOB on December 16, 2021. |
THE OFFERING
| Shares
offered by us |
|
Up
to [●] Class A ordinary shares based on an assumed public offering price of $[●] per Share, which is the last reported
sales price of our Class A Shares on the Nasdaq Capital Market on [●], 2025. |
| Class A
Shares Outstanding Prior to Completion of Offering |
|
7,987,959
(excluding (i) 382,395 Class A Shares issuable upon the exercise of outstanding options
and vesting of restricted shares under the Company’s incentive plan; and (iii) 47,964 Class A Shares issuable upon
the exercise of outstanding 2021 warrants ). |
Common Warrants | | Each
Share will be sold together with one Common Warrant. Each Common Warrant has an exercise
price per Share equal to the public offering price of Share in this offering and expires
on the fifth anniversary of the original issuance date. Because we will issue a Common Warrant
for each Share sold in this offering, the number of Common Warrants sold in this offering
will not change as a result of a change in the Shares sold. This offering also relates to
the Shares issuable upon exercise of any Common Warrants sold in this offering. |
| Use
of proceeds |
|
We
expect to receive approximately $[●] million in net proceeds from the sale of Shares
offered by us in this offering, based on an assumed public offering price of $[●]
per Share, which was the closing price of our Shares on the Nasdaq Capital Market on [●],
2025, after deducting placement agent discounts and commissions and estimated offering
expenses payable by us.
We currently expect to use the net proceeds
from this offering for general corporate purposes, which may include operating expenses, research and development, working capital,
future acquisitions and general capital expenditures.
We have not determined the amount of net
proceeds to be used specifically for such purposes. As a result, our management will have broad discretion in the application of
the net proceeds of this offering. See “Use of Proceeds” for additional information. |
| Nasdaq
Capital Market Symbol: |
|
RCON |
| Risk
Factors: |
|
An
investment in the Shares offered under this prospectus is highly speculative and involves substantial risk. Please carefully consider
the “Risk Factors” section on page 25 and other information in this prospectus for a discussion of risks. Additional
risks and uncertainties not presently known to us or that we currently deem to be immaterial may also impair our business and operations. |
Unless otherwise indicated, all information in
this prospectus assumes or gives effect to:
| · | No
exercise of the warrants or options described above; and |
| · | The
Reverse Split effective on May 1, 2024. |
See “Description of Securities” for additional information.
Risk
Factors
Before you make a decision to invest in our securities,
you should consider carefully the risks described below. If any of the following events actually occur, our business, operating results,
prospects or financial condition could be materially and adversely affected. This could cause the trading price of our Shares to decline
and you may lose all or part of your investment. The risks described below are not the only ones that we face. Additional risks not presently
known to us or that we currently deem immaterial may also significantly impair our business operations and could result in a complete
loss of your investment.
You should also carefully consider the risk
factors set forth under “Risk Factors” described in our most recent annual report on Form 20-F, filed on October 30, 2024, as amended, together with all other information contained or incorporated by reference in this prospectus
and any applicable prospectus supplement and in any related free writing prospectus in connection with a specific offering, before making
an investment decision. Each of the risk factors could materially and adversely affect our business, operating results, financial condition
and prospects, as well as the value of an investment in our securities, and the occurrence of any of these risks might cause you to lose
all or part of your investment.
Risks Related to Doing Business In China
The recent state government interference
into business activities on U.S. listed Chinese companies may negatively impact our existing and future operations in China.
Recently, the Chinese government announced that
it would step up supervision of Chinese firms listed offshore. Under the new measures, China will improve regulation of cross-border
data flows and security, crack down on illegal activity in the securities market and punish fraudulent securities issuance, market manipulation
and insider trading, China will also check sources of funding for securities investment and control leverage ratios. The Cyberspace Administration
of China (“CAC”) has also opened a cybersecurity probe into several U.S.-listed tech giants focusing on anti-monopoly, financial
technology regulation and more recently, with the passage of the Data Security Law, how companies collect, store, process and transfer
data. If we are subject to such a probe or if we are required to comply with stepped-up supervisory requirements, valuable time from
our management and money may be expended in complying and/or responding to the probe and requirements, thus diverting valuable resources
and attention away from our operations. This may, in turn, negatively impact our operations.
Because of the VIEs and their subsidiaries in
China and given the Chinese government’s significant oversight and discretion over the conduct of our business operations there,
the Chinese government may seek to affect our operations, including our ability to offer securities to investors, list our securities
on a U.S. or other foreign exchange, conduct our business or accept foreign investment. The Chinese government may intervene or influence
the Company’s current and future operations in China at any time, or may exert more control over offerings conducted overseas and/or
foreign investment in issuers likes ourselves.
If any or all of the foregoing were to occur,
this could lead to a material change in the Company’s operations and/or the value of our ordinary shares and/or significantly limit
or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly
decline or be worthless.
We have engaged in transactions with related
parties, and such transactions present possible conflicts of interest that could have an adverse effect on our business and results of
operations.
We
entered into a number of transactions with related parties. All material related party transactions must be approved by our board
of directors. Such material related party transactions must be made or entered into on bona fide terms in the best interests of the Company
and not with the effect of constituting a fraud on the minority shareholders.
Transactions with related parties present potential
for conflicts of interest, as the interests of related party may not align with the interests of our shareholders. Although we believe
these transactions were in our best interests, we cannot assure you that these transactions were entered into on terms as favorable to
us as those that could have been obtained in an arms-length transaction. We may also engage in transactions with related parties in the
future. Conflicts of interests arise when we transact business with related parties. These transactions, individually or in the aggregate,
may have an adverse effect on our business and results of operations or may result in government enforcement actions or other litigation.
The Chinese government exerts substantial
influence over the manner in which we must conduct our business activities and may intervene or influence our operations at any time,
which could result in a material change in our operations and the value of our Class A Ordinary Shares.
The Chinese government has exercised and continues
to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability
to operate in China may be harmed by changes in its laws and regulations, including those relating to securities regulation, data protection,
cybersecurity and mergers and acquisitions and other matters. The central or local governments of these jurisdictions may impose new,
stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to
ensure our compliance with such regulations or interpretations.
Government actions in the future could significantly
affect economic conditions in China or particular regions thereof and could require us to materially change our operating activities
or divest ourselves of any interests we hold in Chinese assets. Our business may be subject to various government and regulatory interference
in the provinces in which we operate. We may incur increased costs necessary to comply with existing and newly adopted laws and regulations
or penalties for any failure to comply. Our operations could be adversely affected, directly or indirectly, by existing or future laws
and regulations relating to our business or industry.
Given
recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted
overseas and/or foreign investment in China-based issuers, any such action could significantly limit or completely hinder our ability
to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless.
It is uncertain when and whether we will be required to obtain permission from the PRC government to offering securities in the
U.S. in the future, and even when such permission is obtained, whether we will be denied or rescinded. Although we are currently not
required to obtain permission from any of the PRC regulatory authorities to obtain such permission and has not received any denial regarding
our listing on the Nasdaq Capital Market and the entry into the VIE Agreements, our operations could be adversely affected, directly
or indirectly, by existing or future laws and regulations relating to our business or industry.
Our shares may be delisted under the Holding
Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors for three consecutive years beginning in 2021. Such
a lack of inspection could cause trading in our securities to be prohibited under the Holding Foreign Companies Accountable Act and as
a result an exchange may determine to delist our securities. The delisting of our shares, or the threat of their being delisted, may
materially and adversely affect the value of your investment.
The Holding Foreign Companies Accountable Act,
or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states if the SEC determines that a company has filed audit reports
issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning
in 2021, the SEC shall prohibit such shares from being traded on a national securities exchange or in the over the counter trading market
in the U.S.
On March 24, 2021, the SEC adopted interim
final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. A company will
be required to comply with these rules if the SEC identifies it as having a “non-inspection” year under a process to
be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCA Act, including the listing
and trading prohibition requirements described above.
Our current auditor, Enrome LLP, as an auditor
of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States
pursuant to which the PCAOB conducts regular inspections to assess their compliance with the applicable professional standards. We are
not aware of any reasons to believe or conclude that Enrome LLP would not permit an inspection by PCAOB or that it may not be subject
to such inspection. However, given the recent developments, we cannot assure you whether NASDAQ or regulatory authorities would apply
additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality
control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to
the audit of our financial statements. In the event that there is a lack of inspection or if Enrome LLP is unable to permit an inspection
by the PCAOB, however unlikely, our shares would be prohibited under the HFCA Act which may lead a securities exchange to determine to
delist our shares. Such potential delisting would substantially impair your ability to sell or purchase our shares when you wish to do
so, and such risk and uncertainty associated with a potential delisting due to a lack of inspection would have a negative impact on the
price of our shares.
The SEC may propose additional rules or
guidance that could impact us if our auditor is not subject to PCAOB inspection. For example, on August 6, 2020, the President’s
Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors from Significant Risks from Chinese
Companies to the then President of the United States. This report recommended the SEC implement five recommendations to address companies
from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate. Some of the concepts of these
recommendations were implemented with the enactment of the HFCA Act. However, some of the recommendations were more stringent than the
HFCA Act. For example, if a company’s auditor was not subject to PCAOB inspection, the report recommended that the transition period
before a company would be delisted would end on January 1, 2022. The SEC has announced that the SEC staff is preparing a consolidated
proposal for the rules regarding the implementation of the HFCA Act and to address the recommendations in the PWG report.
On June 22, 2021, the U.S. Senate passed
a bill titled as the Accelerating Holding Foreign Companies Accountable Act, or AHFCA Act.
Further, the PCAOB adopted a final rule on
September 22, 2021 implementing the HFCA Act. Such final rule, however, remains subject to the SEC’s approval and it remains
when the SEC will complete its rulemaking and when such rules will become effective and what, if any, of the PWG recommendations
and or PCAOB’s rule will be adopted.
On December 2, 2021, the SEC adopted amendments
to finalize rules implementing the submission and disclosure requirements in the Holding Foreign Companies Accountable Act.
On December 16, 2021, the PCAOB issued a
report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered
in mainland China and in Hong Kong because of positions taken by PRC and Hong Kong authorities in those jurisdictions.
The PCAOB adopted a final rule on September 22,
2021 implementing the HFCA Act, subject to SEC approval. The final rules adopted by the SEC relating to the HFCA Act became effective
on January 10, 2022.
On August 26, 2022, the SEC announced that
the PCAOB signed a Statement of Protocol with the CRSC and the Ministry of Finance of the PRC, which sets out specific arrangements on
conducting inspections and investigations by both sides over relevant audit firms within the jurisdiction of both sides, including the
audit firms based in mainland China and Hong Kong. This agreement marks an important step towards resolving the audit oversight issue
that concern mutual interests, and sets forth arrangements for both sides to cooperate in conducting inspections and investigations of
relevant audit firms, and specifies the purpose, scope and approach of cooperation, as well as the use of information and protection
of specific types of data. On December 29, 2022, the Consolidated Appropriations Act was signed into law. The Consolidated Appropriations
Act contains, among other things, an identical provision to AHFCAA, which reduces the number of consecutive non-inspection years required
for triggering the prohibitions under the HFCAA from three years to two.
The implications of this possible regulation
in addition to the requirements of the HFCA Act and possibly, the AHFCA Act, if enacted, are uncertain. If the PCAOB, SEC, and CRSC are
unable to agree on a framework under the Statement of Protocol, the lack of access to the PCAOB inspection in China prevents the PCAOB
from fully evaluating audits and quality control procedures of the auditors based in China. As a result, investors may be deprived of
the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult
to evaluate the effectiveness of these accounting firm’s audit procedures or quality control procedures as compared to auditors
outside of China that are subject to the PCAOB inspections, which could cause investors and potential investors in our Class A Shares
to lose confidence in our audit procedures and reported financial information and the quality of our financial statements. Such uncertainty
could cause the market price of our shares to be materially and adversely affected, and our securities could be delisted or prohibited
from being traded on the national securities exchange earlier than would be required by the HFCA Act or the AHFCA Act. If our shares
are unable to be listed on another securities exchange by then, such a delisting would substantially impair your ability to sell or purchase
our shares when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on
the price of our shares.
Changes in China’s economic, political
or social conditions or government policies could have a material adverse effect on our future business and operations.
The Chinese economy differs from the economies
of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control
of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization
of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate
governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition,
the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies.
The Chinese government also exercises significant
control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations,
setting monetary policy, and providing preferential treatment to particular industries or companies.
While the Chinese economy has experienced significant
growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes
in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China could have a material
adverse effect on the overall economic growth of China. Such developments could adversely affect our future business and operating results,
lead to reduction in demand for our services and adversely affect our competitive position. The Chinese government has implemented various
measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy
but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government
control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain
measures, including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity
in China, which may adversely affect our future business and operating results.
We may be exposed to liabilities under
the Foreign Corrupt Practices Act and Chinese anti-corruption law.
In connection with any future offering, we may
be subjected to the U.S. Foreign Corrupt Practices Act (“FCPA”), and other laws that prohibit improper payments or offers
of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for
the purpose of obtaining or retaining business. We may also be subjected to Chinese anti-corruption laws, which strictly prohibit the
payment of bribes to government officials. Going forward we may have operations, agreements with third parties, and make sales in China,
which may experience corruption. Our future activities in China may create the risk of unauthorized payments or offers of payments by
one of the employees of our Company, because sometimes these employees are out of our control. Violations of the FCPA or Chinese anti-corruption
laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our
business, operating results and financial condition. In addition, the government may seek to hold our Company liable for successor liability
FCPA violations committed by companies in which we invest or that we acquire.
The PRC government may issue further restrictive
measures in the future.
We cannot assure you that the PRC’s government
will not issue further restrictive measures in the future. The PRC government’s restrictive regulations and measures could increase
our existing and future operating costs in adapting to these regulations and measures, limit our access to capital resources or even
restrict our existing and future business operations, which could further adversely affect our business and prospects.
PRC regulations relating to investments
in offshore companies by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiaries to liability or penalties,
limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries’ ability to increase their registered
capital or distribute profits.
SAFE promulgated the Circular on Relevant Issues
Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special
Purpose Vehicles, or SAFE Circular 37, on July 4, 2014, which replaced the former circular commonly known as “SAFE Circular
75” promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents to register with local branches of SAFE in
connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing,
with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred
to in SAFE Circular 37 as a “special purpose vehicle.” SAFE Circular 37 further requires amendment to the registration in
the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed
by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC resident holding interests
in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may
be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange
activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary.
Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for
evasion of foreign exchange controls.
SAFE promulgated the Notice of SAFE on Further
Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment, or SAFE Circular 13, on February 13,
2015, which was effective on June 1, 2015. SAFE Circular 13 cancels two administrative approval items: foreign exchange registration
under domestic direct investment and foreign exchange registration under overseas direct investment, instead. Banks shall directly examine
and handle foreign exchange registration under domestic direct investment and foreign exchange registration under overseas direct investment,
and SAFE and its branch shall indirectly regulate the foreign exchange registration of direct investment through banks.
In 2008, to protect
our shareholders from possible future foreign ownership restrictions, our Founders signed a series of agreements with Recon-JN, BHD and
Nanjing Recon, so Recon-JN became the primary beneficiary of BHD and Nanjing Recon for accounting purposes. On April 1, 2019, as
part of our planned organizational restructuring, Recon-BJ entered into a series of VIE agreements with BHD and Nanjing Recon, respectively,
under the same terms and conditions as that of the VIE agreements previously entered into by Recon-JN. As a result, the VIEs were effectively
transferred from Recon-JN to Recon-BJ. Our beneficial owners, Mr. Chen Guangqiang and Mr. Yin Shenping, both PRC residents, initially
completed their SAFE registration at the Jining branch of SAFE. However, they failed to comply with the required procedures to update
and amend their SAFE registration in a timely manner.
Failure to register
or comply with relevant requirements may subject Mr. Chen, Mr. Yin and our PRC subsidiaries to fines and legal sanctions. The non-compliance
could also limit our ability to contribute additional capital to our PRC subsidiaries and restrict their ability to distribute dividends
to our company. Additionally, it may constrain our PRC subsidiaries' ability to increase their registered capital or distribute profits.
Such risks could have a material adverse effect on our business, financial condition, and results of operations. Due to the lack of interconnection
between the SAFE registration systems in Jining and Beijing, Mr. Chen and Mr. Yin have established two new BVI offshore companies to
transfer their previously held shares and update their SAFE registration. However, whether the amendment registration can be completed
remains uncertain. We urge investors to fully consider this associated risks.
PRC laws and regulations governing our
current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to
operate profitably.
There are substantial uncertainties regarding
the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our
business and the enforcement and performance of our arrangements with customers in certain circumstances. The laws and regulations are
sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty.
The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may
be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted or interpreted in a manner
different from our understanding of these laws and regulations. New laws and regulations that affect existing and proposed future businesses
may also be applied retroactively. Recon cannot predict what effect the interpretation of existing or new PRC laws or regulations may
have on our business.
The PRC legal system is a civil law system based
on written statutes. Prior court decisions are encouraged to be used for reference but it remains unclear to what extent the prior court
decisions may impact the current court ruling as the encouragement policy is new and there is limited judicial practice in this regard.
Since a large number of laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations
of many laws, regulations and rules are not always uniform and the enforcement of these laws, regulations and rules involves
uncertainties.
In 1979, the PRC government began to promulgate
a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past
four decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has
not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic
activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC
administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual
terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy.
These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual rights
or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in
attempts to extract payments or benefits from us.
Furthermore, the PRC legal system is based in
part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive
effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation.
In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources
and management attention.
From time to time, we may have to resort to administrative
and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion
in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative
and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system
is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may
have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the
violation. Such uncertainties, including uncertainty over the scope and effect of its contractual, property (including intellectual property)
and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect
our business and impede our ability to continue our operations.
We are also subject to the legal and operational
risks associated with being based in and having substantially all operations in China. These risks may result in material changes in
operations, or a complete hindrance of Recon’s ability to offer or continue to offer its securities to investors, and could cause
the value of Recon’s securities to significantly decline or become worthless. Recently, the PRC government initiated a series of
regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal
activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity
structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.
On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council
jointly issued an announcement to crack down on illegal activities in the securities market and promote the high-quality development
of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight
of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and
improve the system of extraterritorial application of the PRC securities laws. On December 28, 2021, Cybersecurity Review Measures
(2021 version) was issued, which became effective on February 15, 2022. As of the date of this prospectus, the above regulations
have not impacted our ability to conduct the business, accept foreign investments, or list on a U.S. or other foreign exchange; however,
there are uncertainties in the interpretation and enforcement of these new laws and guidelines, which could materially and adversely
impact our overall business and financial outlook.
We
may be subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with
applicable laws and obligations could have a material and adverse effect on our business, financial condition and results of operations.
We may be subject relating various risks and
costs associated with to the collection, use, sharing, retention, security, and transfer of confidential and private information, such
as personal information and other data. This data is wide ranging and relates to our investors, employees, contractors and other counterparties
and third parties. The relevant PRC laws apply not only to third-party transactions, but also to transfers of information between us,
the Domestic Companies, our subsidiaries and other parties with which we have commercial relations.
The PRC regulatory and enforcement regime with
regard to privacy and data security is evolving. The PRC Cybersecurity Law which was promulgated on November 7, 2016 and became
effective on June 1, 2017 provides that personal information and important data collected and generated by operators of critical
information infrastructure in the course of their operations in the PRC should be stored in the PRC, and the law imposes heightened regulation
and additional security obligations on operators of critical information infrastructure. According to the Cybersecurity Review Measures
promulgated by the Cyberspace Administration of China and certain other PRC regulatory authorities in April 2020, which became effective
in June 2020, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products
and services which do or may affect national security.
On December 28,
2021, the CAC published the CAC Revised Measures which further restates and expands the applicable scope of the cybersecurity review.
The CAC Revised Measures took effect on February 15, 2022. Pursuant to the CAC Revised Measures, if a network platform operator holding
personal information of over one million users seeks for “foreign” listing, it must apply for the cybersecurity review. In
addition, operators of critical information infrastructure purchasing network products and services are also obligated to apply for the
cybersecurity review for such purchasing activities. In July 2022, the CAC promulgated the Measures on Security Assessment of Cross-border
Data Transfer, which took effect on September 1, 2022. These measures outline the requirements and procedures for security
assessments on export of Important Data or personal information collected or generated within the territory of mainland China. Furthermore,
these measures provide that the security assessment shall combine pre-assessment and continuous supervision, and risk self-assessment
and security assessment to prevent data export security risks. Specifically, security assessment is required before any cross-border
data can be transferred out of mainland China if: (i) the data transferred out of mainland China is Important Data; (ii) the
data processor is a critical information infrastructure operator or data processor that processes personal information of more than one
million individuals; (iii) cross-border data transfer of personal information by a data processor who has made cross-border
transfer of aggregately more than 100,000 individuals’ personal information or more than 10,000 individuals’ sensitive personal
information since January 1st of the previous year; or (iv) otherwise required by the CAC.
Although
the CAC Revised Measures provides no further explanation on the extent of “network platform operator” and “foreign”
listing, as confirmed by our PRC counsel, Jingtian & Gongcheng, we are not subject to cybersecurity review with the CAC in accordance
with the CAC Revised Measures and security assessment for outbound data, because (i) we are not in possession of or otherwise holding
any Important Data, (ii) we are not in possession of or otherwise holding personal information of over one million users and it
is also very unlikely that it will reach such threshold in the near future; and (iii) as of the date of this prospectus, we have not
received any notice or determination from applicable PRC governmental authorities identifying it as a critical information infrastructure
operator. However, since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative
regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will
be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business
operation, the ability to accept foreign investments and list on an U.S. exchange. In the future, if we provide or are
deemed to provide such network products and services to critical information infrastructure operators, or we are deemed to be a critical
information infrastructure operator, we would be required to follow cybersecurity review procedures. There can be no assurance that we
would be able to complete the applicable cybersecurity review procedures in a timely manner, or at all, if we are required to follow
such procedures. Any failure or delay in the completion of the cybersecurity review procedures may prevent us from using or providing
certain network products and services, and may result in fines of up to ten times the purchase price of such network products and services
being imposed upon us, if we are to be deemed a critical information infrastructure operator using network products or services without
having completed the required cybersecurity review procedures. The PRC government is increasingly focused on data security, recently
launching cybersecurity review against a number of mobile apps operated by several US-listed Chinese companies and prohibiting these
apps from registering new users during the review period.
On June 10, 2021, the Standing Committee
of the National People’s Congress of China promulgated the Data Security Law which shall take effect in September 1, 2021.
The Data Security Law provides for data security and privacy obligations of entities and individuals carrying out data activities, prohibits
entities and individuals in China from providing any foreign judicial or law enforcement authority with any data stored in China without
approval from the competent PRC authority, and sets forth the legal liabilities of entities and individuals found to be in violation
of their data protection obligations, including rectification order, warning, fines of up to RMB10 million, suspension of relevant business,
and revocation of business permits or licenses.
On August 20, 2021, the Standing Committee
of the National People’s Congress adopted the Personal Information Security Law, which shall come into force as of November 1,
2021. The Personal Information Protection Law includes the basic rules for personal information processing, the rules for cross-border
provision of personal information, the rights of individuals in personal information processing activities, the obligations of personal
information processors, and the legal responsibilities for illegal collection, processing, and use of personal information.
In addition, on July 10, 2021, the Cyberspace
Administration of China issued the Measures for Cybersecurity Review (Revision Draft for Comments) for public comments, which proposes
to authorize the relevant government authorities to conduct cybersecurity review on a range of activities that affect or may affect
national security, including listings in foreign countries by companies that possess personal data of more than one million users. The
PRC National Security Law covers various types of national security, including technology security and information security.
We do not collect, process or use personal information
of entities or individuals other than what is necessary for our business and do not disseminate such information. We do not operate mobile
apps and we do not possess information on more than a million entities/individuals. Although we believe we currently are not required
to obtain clearance from the Cyberspace Administration of China under the Measures for Cybersecurity Review (Revision Draft for Comments)
or the Opinions on Strictly Cracking Down on Illegal Securities Activities, we face uncertainties as to the interpretation or implementation
of such regulations or rules, and if required, whether such clearance can be timely obtained, or at all.
Compliance with the PRC Cybersecurity Law, the
PRC National Security Law, the Data Security Law, the Personal Information Protection Law, the Cybersecurity Review Measures, as well
as additional laws and regulations that PRC regulatory bodies may enact in the future, including data security and personal information
protection laws, may result in additional expenses to us and subject us to negative publicity, which could harm our reputation among
users and negatively affect the trading price of our shares in the future. There are also uncertainties with respect to how the PRC Cybersecurity
Law, the PRC National Security Law and the Data Security Law will be implemented and interpreted in practice. PRC regulators, including
the Ministry of Public Security, the MIIT, the SAMR and the Cyberspace Administration of China, have been increasingly focused on regulation
in the areas of data security and data protection, including for mobile apps, and are enhancing the protection of privacy and data security
by rule-making and enforcement actions at central and local levels. We expect that these areas will receive greater and continued attention
and scrutiny from regulators and the public going forward, which could increase our compliance costs and subject us to heightened risks
and challenges associated with data security and protection. If we are unable to manage these risks, we could become subject to penalties,
including fines, suspension of business, prohibition against new user registration (even for a short period of time) and revocation of
required licenses, and our reputation and results of operations could be materially and adversely affected.
It may be difficult for overseas shareholders
and/or regulators to conduct investigation or collect evidence within China.
Shareholder claims or regulatory investigation
that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China,
there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated
outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities
of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory
authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according
to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities
regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. While detailed
interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities
regulator, such as the Department of Justice, the SEC, the PCAOB and other authorities, to directly conduct investigation or evidence
collection activities within China may further increase difficulties faced by you in protecting your interests.
Some of our business operations are conducted
in Hong Kong and the PRC. In the event that the U.S. regulators carry out investigation on us and there is a need to conduct investigation
or collect evidence within the territory of the PRC, the U.S. regulators may not be able to carry out such investigation or evidence
collection directly in the PRC under the PRC laws. The U.S. regulators may consider cross-border cooperation with securities regulatory
authority of the PRC by way of judicial assistance, diplomatic channels or regulatory cooperation mechanism established with the securities
regulatory authority of the PRC.
Under the PRC Enterprise Income Tax Law,
or the EIT Law, we may be classified as a “resident enterprise” of China, which could result in unfavorable tax consequences
to us and our non-PRC shareholders.
The EIT Law and its implementing rules provide
that enterprises established outside of China whose “de facto management bodies” are located in China are considered
“resident enterprises” under PRC tax laws. The implementing rules promulgated under the EIT Law define the term “de
facto management bodies” as a management body which substantially manages, or has control over the business, personnel, finance
and assets of an enterprise. In April 2009, the State Administration of Taxation, or SAT, issued a circular, known as Circular 82, which
provides certain specific criteria for determining whether the “de facto management bodies” of a PRC-controlled enterprise
that is incorporated offshore is located in China. However, there are no further detailed rules or precedents governing the procedures
and specific criteria for determining “de facto management body.” Although our board of directors and management are
located in the PRC, it is unclear if the PRC tax authorities would determine that we should be classified as a PRC “resident enterprise.”
If we are deemed a PRC “resident enterprise,”
we will be subject to PRC enterprise income tax on our worldwide income at a uniform tax rate of 25%, although dividends distributed
to us from our existing subsidiaries in China or the VIE and any other subsidiaries in China or the VIE which we may establish from time
to time could be exempt from the PRC dividend withholding tax due to our PRC “resident recipient” status. This could have
a material and adverse effect on our overall effective tax rate, our income tax expenses and our net income. Furthermore, dividends,
if any, paid to our shareholders may be decreased as a result of the decrease in distributable profits. In addition, if we were considered
a PRC “resident enterprise”, any dividends we pay to our non-PRC investors, and the gains realized from the transfer of our
Class A Ordinary Shares may be considered income derived from sources within the PRC and be subject to PRC tax, at a rate of 10% in the
case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax
treaty). It is unclear whether holders of our Class A Ordinary Shares would be able to claim the benefits of any tax treaties between
their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. This could have a material
and adverse effect on the value of your investment in us and the price of our Class A Ordinary Shares.
Risk of potential adverse impact on our
business and operations in China due to tax compliance issues in equity transfers of our PRC subsidiaries.
Several of our PRC subsidiaries have undergone
multiple equity transfers in the past. According to the Individual Income Tax Law of the People's Republic of China (IIT Law, 2018 Amendment),
where an individual undergoes modification registration for transfer of equities, the registration authority of the market participant
shall verify the payment receipt of individual income tax related to the equity transaction. Since we have successfully completed the
modification registration processes, taxes related to the previous equity transfers have been duly paid. However, as of the date of this
prospectus, we are unable to provide tax certificates for all individual transferors involved in these transactions.
This lack of documentation could expose the company
to potential risks, including tax investigations or penalties imposed by the tax authorities. If the tax authorities determine that the
transferors did not fully comply with their tax obligations, our PRC subsidiaries or the company may be held liable for any unpaid taxes,
penalties, or interest, which could have a material adverse effect on our financial condition and results of operations. Additionally,
the absence of such certificates may lead to further scrutiny by tax authorities, which could result in delays or additional costs in
completing future transactions involving equity transfers.
There are significant uncertainties under
the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore
subsidiaries may not qualify to enjoy certain treaty benefits.
Under
the PRC EIT Law and its implementation rules, the profits of a foreign invested enterprise generated through operations, which are distributed
to its immediate holding company outside the PRC, will be subject to a withholding tax rate of 10%. Pursuant to a special arrangement
between Hong Kong and the PRC, such rate may be reduced to 5% if a Hong Kong resident enterprise owns more than 25% of the equity interest
in the PRC company. Our PRC subsidiary is wholly-owned by our Hong Kong subsidiary. Moreover, under the Notice of the State Administration
of Taxation on Issues regarding the Administration of the Dividend Provision in Tax Treaties promulgated on February 20, 2009, the taxpayer
needs to satisfy certain conditions to enjoy the benefits under a tax treaty. These conditions include: (1) the taxpayer must be the
beneficial owner of the relevant dividends, and (2) the corporate shareholder to receive dividends from the PRC subsidiary must have
continuously met the direct ownership thresholds during the 12 consecutive months preceding the receipt of the dividends. Further, the
State Administration of Taxation promulgated the Notice on How to Understand and Recognize the “Beneficial Owner” in Tax
Treaties on October 27, 2009, which limits the “beneficial owner” to individuals, projects or other organizations normally
engaged in substantive operations, and sets forth certain detailed factors in determining the “beneficial owner” status.
In current practice, a Hong Kong enterprise must obtain a tax resident certificate from the relevant Hong Kong tax authority to apply
for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case
basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority. As
of the date of this prospectus, we have not commenced the application process for a Hong Kong tax resident certificate from the
relevant Hong Kong tax authority, and there is no assurance that we will be granted such a Hong Kong tax resident certificate.
Even after we
obtain the Hong Kong tax resident certificate, we are required by applicable tax laws and regulations to file required forms and materials
with relevant PRC tax authorities to prove we can enjoy the 5% lower PRC withholding tax rate. Recon HK intends to obtain the
required materials and file with the relevant tax authorities when it plans to declare and pay dividends, but there is no assurance that
the PRC tax authorities will approve the 5% withholding tax rate on dividends received from Recon HK.
Failure to renew expired Hazardous Waste
Operating Permit and unutilized ICP License could adversely affect our operations and financial performance
Gansu Baihengda operates a facility with an annual
capacity of 60,000 tons for the comprehensive utilization and harmless treatment of oilfield oily waste. This facility primarily handles
oily sludge, which contains mineral oil components that pose significant environmental risks if not properly managed. Therefore, compliance
with the Solid Waste Sludge Environmental Protection Law and the Hazardous Waste Operating Permit Management Regulations is mandatory
for the proper treatment and disposal of oily sludge. However, the company's Hazardous Waste Operating Permit, which is essential for
the legal operation of the facility, expired on January 1, 2024, and has not yet been renewed. While Gansu Baihengda ceased relevant
operations after the permit expired and is actively pursuing renewal, the expired permit could negatively impacting the company’s
revenue streams and operational efficiency. Moreover, the timeline and outcome of the renewal process remain uncertain. Administrative
delays or denial of the renewal could further prevent the company from resuming hazardous waste management activities, adversely affecting
its future operations and financial stability..
In addition, Future Gas Station holds an ICP
license that has been continuously renewed despite not being utilized. This situation may lead to inefficiencies and additional costs
without generating revenue, ultimately impacting the company’s profitability and financial health.The ongoing renewal of the ICP
license without active use may also raise concerns among regulatory authorities about the validity of the license and the company’s
intentions. This could lead to increased scrutiny or potential regulatory compliance issues.
Failure to comply with laws and regulations
applicable to our business in China could subject us to fines and penalties and could also cause us to lose customers or otherwise harm
our business.
Our business is subject to regulation by various
governmental agencies in China, including agencies responsible for monitoring and enforcing compliance with various legal obligations,
such as value-added telecommunication laws and regulations, privacy and data protection-related laws and regulations, intellectual
property laws, employment and labor laws, workplace safety, environmental laws, consumer protection laws, governmental trade laws, import
and export controls, anti-corruption and anti-bribery laws, and tax laws and regulations. In certain jurisdictions, these regulatory
requirements may be more stringent than in China. These laws and regulations impose added costs on our business. Noncompliance with applicable
regulations or requirements could subject us to:
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If any governmental sanctions are imposed, or
if we do not prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could
be adversely affected. In addition, responding to any action will likely result in a significant diversion of our management’s
attention and resources and an increase in professional fees. Enforcement actions and sanctions could materially harm our business, results
of operations, and financial condition.
Additionally, companies in the technology industry
have recently experienced increased regulatory scrutiny. Any similar reviews by regulatory agencies or legislatures may result in substantial
regulatory fines, changes to our business practices, and other penalties, which could negatively affect our business and results of operations.
Changes in social, political, and regulatory
conditions or in laws and policies governing a wide range of topics may cause us to change our business practices. Further, our expansion
into a variety of new fields also could raise a number of new regulatory issues. These factors could negatively affect our business and
results of operations in material ways.
Moreover, we are exposed to the risk of misconduct,
errors and failure to functions by our management, employees and parties that we collaborate with, who may from time to time be subject
to litigation and regulatory investigations and proceedings or otherwise face potential liability and penalties in relation to noncompliance
with applicable laws and regulations, which could harm our reputation and business.
The recent joint statement by the SEC,
proposed rule changes submitted by NASDAQ, and an act passed by the U.S. Senate and the U.S. House of Representatives, all call
for additional and more stringent criteria to be applied to emerging market companies. These developments could add uncertainties to
our future offerings, business operations share price and reputation.
U.S. public companies that have substantially
all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial
commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered on financial
and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance
policies or a lack of adherence thereto and, in many cases, allegations of fraud.
On December 7, 2018, the SEC and the PCAOB
issued a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits
of U.S.-listed companies with significant operations in China. On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William
D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies
based in or have substantial operations in emerging markets including China, reiterating past SEC and PCAOB statements on matters including
the difficulty associated with inspecting accounting firms and audit work papers in China and higher risks of fraud in emerging markets
and the difficulty of bringing and enforcing SEC, Department of Justice and other U.S. regulatory actions, including in instances of
fraud, in emerging markets generally.
On May 20, 2020, the U.S. Senate passed
the Holding Foreign Companies Accountable Act requiring a foreign company to certify it is not owned or controlled by a foreign government
if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the
PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to
trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the Holding Foreign Companies Accountable
Act. The PCAOB adopted a final rule on September 22, 2021 implementing the HFCA Act. The final rules adopted by the SEC
relating to the HFCA Act became effective on January 10, 2022.
On May 21, 2021, NASDAQ filed three proposals
with the SEC to (i) apply minimum offering size requirement for companies primarily operating in a “Restrictive Market”,
(ii) prohibit Restrictive Market companies from directly listing on NASDAQ Capital Market, and only permit them to list on NASDAQ
Global Select or NASDAQ Global Market in connection with a direct listing and (iii) apply additional and more stringent criteria
to an applicant or listed company based on the qualifications of the company’s auditors.
On August 26, 2022, the SEC announced that
the PCAOB signed a Statement of Protocol with the CRSC and the Ministry of Finance of the PRC, which sets out specific arrangements on
conducting inspections and investigations by both sides over relevant audit firms within the jurisdiction of both sides, including the
audit firms based in mainland China and Hong Kong. This agreement marks an important step towards resolving the audit oversight issue
that concern mutual interests, and sets forth arrangements for both sides to cooperate in conducting inspections and investigations of
relevant audit firms, and specifies the purpose, scope and approach of cooperation, as well as the use of information and protection
of specific types of data.
As a result of these scrutiny, criticism and
negative publicity, the publicly traded stock of many U.S. listed Chinese companies sharply decreased in value and, in some cases, has
become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting
internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative
publicity will have on us, our future offerings, business and our share price. If we become the subject of any unfavorable allegations,
whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations
and/or defend our Company. This situation will be costly and time consuming and distract our management from developing our growth. If
such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a significant
decline in the value of our shares.
NASDAQ may apply additional and more stringent
criteria for our continued listing.
NASDAQ Listing Rule 5101 provides NASDAQ
with broad discretionary authority over the continued listing of securities in NASDAQ and NASDAQ may use such discretion to deny apply
additional or more stringent criteria for the continued listing of particular securities, or suspend or delist particular securities
based on any event, condition, or circumstance that exists or occurs that makes continued listing of the securities on NASDAQ inadvisable
or unwarranted in the opinion of NASDAQ, even though the securities meet all enumerated criteria for continued listing on NASDAQ. In
addition, NASDAQ has used its discretion to deny continued listing or to apply additional and more stringent criteria in the instances,
including but not limited to where the company engaged an auditor that has not been subject to an inspection by PCAOB, an auditor that
PCAOB cannot inspect, or an auditor that has not demonstrated sufficient resources, geographic reach, or experience to adequately perform
the company’s audit. For the aforementioned concerns, we may be subject to the additional and more stringent criteria of NASDAQ
for our continued listing.
Future sales of our Class A Shares may cause the prevailing
market price of our shares to decrease.
The issuance and sale of additional Class A
Shares or securities convertible into or exercisable for Class A Shares could reduce the prevailing market price for our Class A
Shares as well as make future sales of equity securities by us less attractive or not feasible. The sale of Class A Shares issued
upon the exercise of our outstanding options could further dilute the holdings of our then existing shareholders.
There has been and may continue to be significant volatility
in the volume and price of our ordinary shares on the Nasdaq Capital Market.
The market price of our ordinary shares has
been and may continue to be highly volatile. Factors, including changes in the Chinese petroleum and energy industry, changes in the
Chinese economy, potential infringement of our intellectual property, competition, concerns about our financial position, operations
results, litigation, government regulation, developments or disputes relating to agreements, patents or proprietary rights, may have
a significant impact on the market volume and price of our shares. Unusual trading volume in our shares occurs from time to time.
Additional compliance procedures may be
required in connection with this offering, due to the promulgation of the new filing-based administrative rules for overseas offering
and listing by domestic companies in China, which could significantly limit or completely hinder our ability to offer or continue to
offer our Ordinary Shares to investors and could cause the value of our Ordinary Shares to significantly decline or become worthless.
On February 17, 2023, the CSRC promulgated
the Trial Measures and five supporting guidelines, which went into effect on March 31, 2023. Pursuant to Article 16 of the
Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing
procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of initial
public offerings or listing application. Where an issuer offers securities in the same overseas market after overseas initial public
offerings or listing, it shall file with the CSRC within three working days after completion of offering. The required filing materials
with the CSRC in relation to the offering in the same overseas market include (without limitation): (i) record-filing reports
and related undertakings; and (ii) PRC legal opinions issued by domestic law firms (with related undertakings).
Pursuant
to the Trial Administrative Measures, we have to file with the CSRC with respect to this offering, and the CSRC will conclude the filing
procedures and publish the filing results on the CSRC website within twenty working days after receiving the filing documents, if the
filing documents are complete and in compliance with stipulated requirements. However, during the filing process, the CSRC may request
the Company to supply additional documents or may consult with competent authorities, the time for which will not be counted in the twenty
working days. As advised by Jingtian & Gongcheng, our PRC counsel, we were not required to complete the filing procedures
pursuant to the Trial Measures for our initial public offering because we completed our IPO and listing prior to September 30, 2023.
However, we are now required to complete the filing procedures with the CSRC pursuant to the requirements of the Trial Measures for subsequent
offerings conducted in the U.S. Based on the above and our understanding of the Chinese laws and regulations currently in effect as of
the date of this prospectus, any failure or perceived failure of the Company to fully comply with the filing requirements could significantly
limit or completely hinder our ability to offer or continue to offer securities to investors, cause significant disruption to our business
operations, and severely damage our reputation, which could materially and adversely affect our financial condition and results of operations,
potentially causing the value of our securities to significantly decline or be worthless.
We have not paid and do not intend to pay
dividends on our Ordinary Shares. Investors in this offering may never obtain a return on their investment.
We have not paid dividends on our ordinary since
inception, and do not intend to pay any dividends on our Class A Shares in the foreseeable future. We intend to reinvest earnings,
if any, in the development and expansion of our business. Accordingly, you will need to rely on sales of your Class A Shares after
price appreciation, which may never occur, in order to realize a return on your investment.
The approval of the China Securities Regulatory Commission and
other compliance procedures may be required in connection with this offering, and, if required, we cannot predict whether we will be
able to obtain such approval.
Regulations on Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors of China (the “M&A Rules”) requires an overseas special purpose vehicle that are controlled
by PRC companies or individuals formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions
of PRC domestic companies using shares of such special purpose vehicle or held by its shareholders as considerations to obtain the approval
of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle’s
securities on an overseas stock exchange. However, the application of the M&A Rules remains unclear. If CSRC approval is required,
it is uncertain whether it would be possible for us to obtain the approval. Any failure to obtain or delay in obtaining CSRC approval
for this offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.
While the application of the M&A Rules remains
unclear, we believe, based on the advice of our PRC counsel, that the CSRC approval is not required in the context of this offering because
(1) the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings under the prospectus
are subject to the M&A Rules; and (2) we established our PRC subsidiaries, by means of direct investment rather than by merger
with or acquisition of PRC domestic companies. However, uncertainties still exist as to how the M&A Rules will be interpreted
and implemented, and the opinion of our PRC counsel is subject to any new laws, rules, and regulations or detailed implementations and
interpretations in any form relating to the M&A Rules. We cannot assure you that the relevant PRC government agencies, including
the CSRC, would reach the same conclusion as our PRC counsel. If the CSRC or other PRC regulatory body subsequently determines that we
need to obtain the CSRC’s approval for this offering or if the CSRC or any other PRC government authorities promulgates any interpretation
or implements rules that would require us to obtain CSRC or other governmental approvals for this offering, we may face adverse
actions or sanctions by the CSRC or other PRC regulatory agencies, which may include fines and penalties on our operations in China,
limitations on our operating privileges in China, delays in or restrictions on the repatriation of the proceeds from this offering into
the PRC, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, or other actions that
could have a material and adverse effect on our business, reputation, financial condition, results of operations, prospects, as well
as the trading price of the ordinary shares. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making
it advisable for us, to halt this offering before the settlement and delivery of the ordinary shares that we are offering. Consequently,
if you engage in market trading or other activities in anticipation of and prior to the settlement and delivery of the ordinary shares
we are offering, you would be doing so at the risk that the settlement and delivery may not occur. In addition, if the CSRC or other
regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for this offering, we may
be unable to obtain a waiver of such approval requirements.
The General Office of the Central Committee of
the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severe and Lawful Crackdown on
Illegal Securities Activities, which was available to the public on July 6, 2021. These opinions emphasized the need to strengthen
the administration over illegal securities activities and the supervision on overseas listings by China-based companies. These opinions
proposed to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks and incidents
facing China-based overseas-listed companies and the demand for cybersecurity and data privacy protection. Moreover, the CAC
issued the Measures of Cybersecurity Review (Revised Draft for Comments) on July 10, 2021, which requires certain operators who
wish to list abroad to file a cybersecurity review with the Office of Cybersecurity Review, such as operators with personal information
of more than one million users. The Cybersecurity Administration of China issued the New Measures for Cybersecurity Review (“New
Measures”) on January 4, 2022. The New Measures amends the Measures for Cybersecurity Review (Draft Revision for Comments)
released on July 10, 2021. The New Measures came into effect on February 15, 2022. The aforementioned policies and any
related implementation rules to be enacted may subject us to additional compliance requirement in the future. As these opinions
were recently issued, official guidance and interpretation of the opinions remain unclear in several respects at this time. We have not
obtained the approval from either the CSRC or the Office of Cybersecurity Review for this offering, and as advised by our PRC counsel,
we do not believe that such approval is necessary under these circumstances or for the time being. We cannot assure you, however, that
the regulators will not take a contrary view or will not subsequently require us to undergo the approval procedures and subject us to
penalties for non-compliance. Therefore, we cannot assure you that we will remain fully compliant with all new regulatory requirements
of these opinions or any future implementation rules on a timely basis, or at all.
On February 17, 2023, the CSRC promulgated the
Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting
guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities
overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures
within three working days following its submission of initial public offerings or listing application. If a domestic company fails to
complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic
company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual
controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as
warnings and fines.
On February 24, 2023, the CSRC, together with
Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised
the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued
by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions.
The revised Provisions is issued under the title the Provisions on Strengthening Confidentiality and Archives Administration of Overseas
Securities Offering and Listing by Domestic Companies, and came into effect on March 31, 2023 together with the Trial Measures. One of
the major revisions to the revised Provisions is expanding its application to cover indirect overseas offering and listing, as is consistent
with the Trial Measures. The revised Provisions require that, including but not limited to (a) a domestic company that plans to, either
directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including
securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or
working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy
administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas
listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers
and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest,
shall strictly fulfill relevant procedures stipulated by applicable national regulations.
Any
failure or perceived failure by the Company, the Company’s subsidiaries in China or the VIE to comply with the above confidentiality
and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in that the relevant
entities would be held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability
if suspected of committing a crime. As there are still uncertainties regarding the interpretation and implementation of such regulatory
guidance, we cannot assure you that we will be able to comply with new regulatory requirements relating to our future overseas capital-raising
activities. Notwithstanding the foregoing, as of the date of this prospectus, we are not aware of any Chinese laws or regulations
in effect requiring that we obtain permission from any Chinese authority to issue securities to foreign investors, and we have not received
any inquiry, notice, warning, sanction or any regulatory objection to our initial public offering from the CSRC.
As advised by
Jingtian & Gongcheng, our PRC counsel, as we completed our IPO and listing prior to September 30, 2023, we were not required
to complete the filing procedures pursuant to the Trial Measures for our initial public offering. However, as we are planning to conduct
further offerings in the U.S., we are now required to complete the filing procedures with the CSRC pursuant to the requirements of the
Trial Measures. Based on the above and our understanding of the Chinese laws and regulations currently in effect as of the date of this
prospectus, we are not aware of any PRC laws or regulations in effect requiring that we obtain permission or approval from any
PRC authorities for our subsidiaries or the VIE’s operations and to issue securities to foreign investors, and we have not received
any inquiry, notice, warning, sanction, or any regulatory objection to our initial offerings from the CSRC, the CAC, or any other PRC
authorities that have jurisdiction over our operations. However, there remains uncertainty as to the enactment, interpretation
and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities. Any failure
to obtain or delay in obtaining such approval, complete required filing or procedures, or a rescission of any such approval or filing
obtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities. These regulatory agencies may impose fines
and penalties on our operations in mainland China, limit our ability to pay dividends outside of China, limit our operations in China,
delay or restrict the repatriation of the proceeds from our initial public offering into mainland China or take other actions that could
have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price
of the Class A Ordinary Shares. In addition, if the CSRC, or other regulatory agencies later promulgate new rules requiring that we obtain
their approvals for our initial public offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures
are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding such an approval requirement could have
a material adverse effect on the trading price of the Class A Ordinary Shares.
Risks Related to our Corporate Structure
We depend upon the Contractual Arrangements
in conducting our business in China, which may not be as effective as direct ownership in providing operational control.
We are a holding company incorporated in the
Cayman Islands. As a holding company with no material operations of our own, we conduct a substantial majority of our operations through
our Wholly Foreign Owned Enterprise (“WFOE”) and the VIEs and their subsidiaries in China providing certain technical and
consultation services. A WFOE is a limited liability company based in the People’s Republic of China but wholly owned by foreign
investors. In our instance, Recon Hengda Technology (Beijing) Co., Ltd. (“Recon-BJ”) is a WFOE wholly owned by Recon Investment
Ltd. (“Recon-IN”), a Hong Kong limited company, which in turn is wholly owned by us. We consolidate the financial results
of BHD and Nanjing Recon into our financial statements based on the VIE agreements entered into on April 1, 2019. Most, if not all,
of our revenue derives from operations of the VIEs and their subsidiaries. Our Class A Shares offered in this offering are shares
of our offshore holding company instead of shares of the VIEs or our PRC subsidiary. These Contractual Arrangements may not be as effective
in providing us with control over the VIEs as direct ownership. For example, the VIEs and their shareholders could breach their contractual
arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that
are detrimental to our interests. In addition, these agreements have not been tested in a court of law.
If we had direct ownership of the VIEs, we would
be able to exercise our rights as a shareholder to effect changes in the board of directors of the VIEs, which in turn could effect changes,
subject to any applicable fiduciary obligations, at the management and operational level. However, under the current Contractual Arrangements,
we rely on the performance by the VIEs and their shareholders of their obligations under the contracts to exercise control over the VIEs.
The shareholders of the VIEs may not act in the best interests of our company or may not perform their obligations under these contracts.
Such risks exist throughout the period in which we intend to operate our business through the Contractual Arrangements with the VIEs.
If any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations
of PRC law and arbitration, litigation and other legal proceedings and therefore will be subject to uncertainties in the PRC legal system.
See “Risk Factor—The shareholder of the VIE may have actual or potential conflicts of interest with us, which may materially
and adversely affect our business and financial condition” Therefore, our Contractual Arrangements with the VIEs may not be as
effective in ensuring our control over the relevant portion of our business operations as direct ownership would be.
We conduct our business through BHD, Nanjing
Recon, FGS and their respective subsidiaries by means of Contractual Arrangements. If the PRC courts or administrative authorities determine
that these contractual arrangements do not comply with applicable regulations, we could be subject to severe penalties and our business
could be adversely affected. In addition, changes in such PRC laws and regulations may materially and adversely affect our business.
There are uncertainties regarding the interpretation
and application of PRC laws, rules and regulations, including the laws, rules and regulations governing the validity and enforcement
of the Contractual Arrangements between the Wholly Foreign Owned Enterprise (“WFOE”). A WFOE is a limited liability company
based in the People’s Republic of China but wholly owned by foreign investors. In our instance, Recon Hengda Technology (Beijing)
Co., Ltd. (“Recon-BJ”) is a WFOE wholly owned by Recon Investment Ltd. (“Recon-IN”), a Hong Kong limited company,
which in turn is wholly owned by us. Recon-BJ and Nanjing Recon, BHD and their respective subsidiaries. We have been advised by our PRC
counsel, JingTian & GongCheng LLP, based on their understanding of the current PRC laws, rules and regulations, that (i) the
structure for operating our business in China (including our corporate structure and Contractual Arrangements with the Recon-BJ,
Nanjing Recon, BHD and their respective subsidiaries) will not result in any violation of PRC laws or regulations currently in effect;
and (ii) the Contractual Arrangements among the Recon-BJ and Nanjing Recon, BHD and their respective subsidiaries governed by PRC
law are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect. However,
there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations concerning
foreign investment in the PRC, and their application to and effect on the legality, binding effect and enforceability of the contractual
arrangements. In particular, we cannot rule out the possibility that PRC regulatory authorities, courts or arbitral tribunals may
in the future adopt a different or contrary interpretation or take a view that is inconsistent with the opinion of our PRC legal counsel.
Therefore, the Contractual Arrangements may be determined by PRC authorities to be inconsistent with the laws and regulations of the
PRC, including those related to foreign investment in certain industries. Therefore, the relevant Chinese regulatory authorities could
disallow this structure and hinder our ability to exert contractual control over the Domestic Companies, which would likely result in
a material change in operations and/or value of the Company’s ordinary shares, including that it could cause the value of such
securities to significantly decline or become worthless.
If any of the Domestic Companies or their ownership
structure or the Contractual Arrangements are determined to be in violation of any existing or future PRC laws, rules or regulations,
or any of our PRC entities fail to obtain or maintain any of the required governmental permits or approvals, the relevant PRC regulatory
authorities would have broad discretion in dealing with such violations, including:
| ● | revoking
the business and operating licenses; |
| ● | discontinuing
or restricting the operations; |
| ● | imposing
conditions or requirements with which the PRC entities may not be able to comply; |
| ● | requiring
us and our PRC entities to restructure the relevant ownership structure or operations, including
termination of the contractual agreements with the VIE and deregistering the equity
pledge of the VIE, which in turn would affect our ability to consolidate, derive economic
interests from, or exert effective control of the VIE; |
| ● | restricting
or prohibiting our use of the proceeds from this offering to finance our business and operations
in China, and taking other regulatory or enforcement actions that could be harmful to our
business; or |
| ● | imposing
fines or confiscating the income from our PRC subsidiaries or the VIE. |
The imposition of any of these penalties would
severely disrupt our ability to conduct business and have a material adverse effect on our financial condition, results of operations
and prospects.
We may have difficulty in enforcing any rights we may have under
the VIE Agreements in PRC.
As
all of the VIE Agreements are governed by the PRC laws and provide for the resolution of disputes through arbitration in the PRC, they
would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal
environment in the PRC is not as developed as in the United States. As a result, uncertainties in the PRC legal system could further
limit our ability to enforce these VIE Agreements. Furthermore, these VIE Agreements may not be enforceable in China if PRC government
authorities or courts take a view that such VIE Agreements contravene PRC laws and regulations or are otherwise not enforceable for public
policy reasons. In the event we are unable to enforce these VIE Agreements, we may not be able to exert effective control over the
VIEs, and our ability to conduct our business may be materially and adversely affected.
The shareholders of the VIEs may have actual
or potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.
The shareholders of the VIEs may have actual
or potential conflicts of interest with us. The shareholders may refuse to sign or breach, or cause the VIEs to breach, or refuse to
renew, the existing contractual arrangements we have with them and the VIEs, which would have a material and adverse effect on our ability
to effectively control the VIEs and receive economic benefits from them. For example, the shareholders may be able to cause our agreements
with the VIEs to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements
to us on a timely basis. We cannot assure you that when conflicts of interest arise the shareholder will act in the best interests of
our company or such conflicts will be resolved in our favor. Currently, we do not have any arrangements to address potential conflicts
of interest between the shareholders and our company. If we cannot resolve any conflict of interest or dispute between us and the shareholders,
we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial
Uncertainties exist with respect to the
interpretation and implementation of the Foreign Investment Law and how it may impact the viability of our current corporate structure,
corporate governance and business operations.
On March 15,
2019, the National People’s Congress approved the Foreign Investment Law (“FIL”), which came into effect on January
1, 2020 and replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture
Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with
their implementation rules and ancillary regulations. The FIL embodies an expected PRC regulatory trend to rationalize its foreign investment
regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements
for both foreign and domestic investments. However, since it is relatively new, uncertainties exist in relation to its interpretation
and implementation. For instance, under the FIL, “foreign investment’’ refers to the investment activities directly
or indirectly conducted by foreign individuals, companies or other entities in China. Though it does not explicitly classify VIE Agreements
as a form of foreign investment, there is no assurance that operations conducted by foreign investors or foreign-invested companies via
contractual arrangement would not be interpreted as a type of indirect foreign investment activities under the definition in the future.
In addition, the definition contains a catch-all provision which includes investments made by foreign investors through means stipulated
in laws or administrative regulations or other methods prescribed by the State Council. Therefore, it still leaves leeway for future
laws, administrative regulations or provisions promulgated by the Stale Council to provide for VIE Agreements as a form of foreign investment.
In any of these cases, it will be uncertain whether the VIE Agreements will be deemed to be in violation of the market access requirements
for foreign investment under the PRC laws and regulations. Furthermore, if future laws, administrative regulations or provisions prescribed
by the State Council mandate further actions to be taken by companies with respect to existing VIE Agreements, we may face substantial
uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures
to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure,
corporate governance and business operations.
There are possible economic risks posed
by foreign exchange rate fluctuations between the U.S. Dollar and RMB.
The Domestic Companies, such as Recon-IN and
Recon-BJ classify the RMB as their functional currencies. Because our functional currency, as the Cayman Islands holding entity, is the
U.S. Dollar, we are exposed to foreign exchange risks from fluctuations with the exchange rates among the U.S. Dollar and the RMB. Notwithstanding
that Domestic Companies conduct operations and transactions in RMB, we ultimately believe that there should not be any U.S. Dollar/RMB
exchange rate fluctuations because the inter-company receivable is denominated in U.S. Dollars. It is possible, however, that foreign
exchange rate fluctuations may materially impact the Domestic Companies’ operations and certain transactions, which would affect
our overall operations and the value of the Class A Shares you have invested in us.
There has been and may continue to be significant
volatility in the volume and price of our ordinary shares on the Nasdaq Capital Market.
The market price of our ordinary shares has
been and may continue to be highly volatile. Factors, including changes in the Chinese petroleum and energy industry, changes in the
Chinese economy, potential infringement of our intellectual property, competition, concerns about our financial position, operations
results, litigation, government regulation, developments or disputes relating to agreements, patents or proprietary rights, may have
a significant impact on the market volume and price of our shares. Unusual trading volume in our shares occurs from time to time.
This is a reasonable best efforts offering,
in which no minimum number or dollar amount of securities is required to be sold, and we may not raise the amount of capital we believe
is required for our business plans.
The placement agent has agreed to use its
reasonable best efforts to solicit offers to purchase the securities in this offering. The placement agent has no obligation to buy any
of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. There is
no required minimum number of securities that must be sold as a condition to completion of this offering, and there can be no assurance
that the offering contemplated hereby will ultimately be consummated. Even if we sell securities offered hereby, because there is no
minimum offering amount required as a condition to the closing of this offering, the actual offering amount is not presently determinable
and may be substantially less than the maximum amount set forth above. We may sell fewer than all of the securities offered hereby, which
may significantly reduce the amount of proceeds received by us. Thus, we may not raise the amount of capital we believe is required for
our operations in the short-term and may need to raise additional funds, which may not be available or available on terms acceptable
to us.
There is no public market for the Common
Warrants being offered in this offering.
There is no established public trading market
for the Common Warrants being offered in this offering, and we do not expect a market to develop. In addition, we do not intend to apply
to list the Common Warrants on any securities exchange or nationally recognized trading system. Without an active market, the liquidity
of the Common Warrants will be limited.
Holders of our Common Warrants will
have no rights as holders of Shares until such warrants are exercised.
Until you acquire Shares upon exercise of
your Common Warrants, you will have no rights with respect to Shares issuable upon exercise of your Common Warrants. Upon exercise of
your Common Warrants, you will be entitled to exercise the rights of a holder of Shares only as to matters for which the record date
occurs after the exercise date.
The Common Warrants may not have any
value.
Each Common Warrant has an exercise price
per Share equal to the public offering price of Shares in this offering and expires on the third anniversary of its original issuance
date. In the event the market price per our Share does not exceed the exercise price of the Common Warrants during the period when the
warrants are exercisable, the Common Warrants may not have any value.
Special
Note Regarding Forward-Looking Statements
This prospectus contains forward-looking statements.
All statements contained in this prospectus other than statements of historical fact, including statements regarding our future results
of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking
statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,”
“intend,” “expect,” and similar expressions are intended to identify forward-looking statements. We have based
these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may
affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives,
and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those
described in the “Risk Factors” section. Moreover, we operate in a very competitive and rapidly changing environment. New
risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors
on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and
trends discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or
implied in the forward-looking statements.
You should not rely upon forward-looking statements
as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance, or achievements. We do not undertake to update any of these forward-looking statements after the date
of this prospectus or to conform these statements to actual results or revised expectations, other than required by the federal securities
laws or other applicable laws.
Use
of Proceeds
We
estimate that the net proceeds from the sale of [●] Shares and the associated Common Warrants in this offering will be approximately
$[●] million, after deducting the estimated placement agent discounts and commissions and estimated offering expenses payable by
us, based on an assumed public offering price of $[●] per Share (the last reported sale price of our Shares on the Nasdaq Capital
Market on [●], 2025, as described on the cover page of this prospectus), after deducting placement agent discounts and commissions
and estimated offering expenses payable by us and excluding the proceeds, if any, from the subsequent exercise of the Common Warrants.
Each
$1.00 increase (decrease) in the assumed public offering price of $[●] per Share would increase (decrease) the net
proceeds to us from this offering, after deducting the estimated placement agent discounts and commissions and estimated offering expenses
payable by us, by $[●] million, assuming that the number of Shares offered by us, as set forth on the cover page of this prospectus,
remains the same. We may also increase or decrease the number of Shares we are offering. An increase (decrease) of [●] in the number
of Shares we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the estimated placement
agent discounts and commissions and estimated offering expenses payable by us, by $[●] thousands, assuming the assumed public offering
price stays the same.
We currently expect to use the net proceeds from this offering for general corporate purposes, which may include
operating expenses, research and development, working capital, future acquisitions and general capital expenditures.
See “Plan of Distribution” elsewhere
in this prospectus for more information.
Capitalization
The following table sets forth our capitalization
as of June 30, 2024. The information in this table should be read in conjunction with and is qualified by reference to the financial
information thereto and other financial information incorporated by reference into this prospectus.
| |
|
June
30, 2024 |
|
| |
|
(a) Actual(1) |
|
|
(b) Pro
Forma(2) |
|
|
(c) Pro
Forma
As Adjusted(3)(4) |
|
| |
|
US$ |
|
|
US$ |
|
|
US$ |
|
| Equity |
|
|
|
|
|
|
|
|
|
| Class A
ordinary shares, $0.0001 U.S. dollar par value, 500,000,000 shares authorized; 2,306,295 shares and 7,987,959 shares issued and outstanding
as of June 30, 2023 and June 30, 2024, respectively |
|
|
13,710 |
|
|
|
13,710 |
|
|
|
|
|
| Class B ordinary
shares, $0.0001 U.S. dollar par value, 80,000,000 shares authorized; 7,100,000 shares and 7,100,000 shares issued and outstanding
as of June 30, 2023 and June 30, 2024, respectively |
|
|
646 |
|
|
|
1,936 |
|
|
|
|
|
| Additional paid-in capital(2) |
|
|
93,774,317 |
|
|
|
93,773,027 |
|
|
|
|
|
| Statutory reserves |
|
|
570,912 |
|
|
|
570,912 |
|
|
|
|
|
| Accumulated deficit |
|
|
(30,315,952 |
) |
|
|
(30,315,952 |
) |
|
|
|
|
| Accumulated other comprehensive gain |
|
|
5,110,173 |
|
|
|
5,110,173 |
|
|
|
|
|
| Total Recon Technology, Ltd’s equity |
|
|
69,153,806 |
|
|
|
69,153,806 |
|
|
|
|
|
| (1) |
Retrospectively
restated for the 1-for-18 reverse share split on May 1, 2024 and change in capital structure on March 29, 2024. |
| (2) |
Gives
effect to the issuance of 12,900,000 restricted Class B Ordinary Shares to management on August 1, 2024. |
| (3) |
Gives
effect to completion of the offering and to reflect the application of the proceeds. |
| (4) |
On a pro forma as adjusted
basis to reflect the issuance and sale of up to [●] Shares by us in this offering at the offering price of US$[●] per
Share, after deducting the placement agent fees and the estimated offering expenses payable by us. |
Dilution
If you invest in our Shares in this offering,
your interest will be immediately diluted to the extent of the difference between the public offering price per Share in this offering
and the as adjusted net tangible book value per Share after this offering. Dilution results from the fact that the public offering price
per Share is substantially in excess of the net tangible book value per Share. As of June 30, 2024, we had a historical positive net
tangible book value of $69,153,806, or positive $8.25 per Share. Our net tangible book value per share represents total tangible assets
less total liabilities, divided by the sum of the number of Class A Ordinary Shares outstanding and one-eighteenth of the number of Class
B Ordinary Shares outstanding on June 30, 2024. Reflecting our 2024 August issuance, we had a historical positive net tangible book
value of $69,153,806, or positive $7.60 per Share.
After giving effect to the sale of Shares in this offering at an
assumed public offering price of $[●] per Share (assuming the sale of the maximum offering amount), and after deducting commissions
and other estimated offering expenses payable by us, our as adjusted net tangible book value at [●], 2025 would have been $[●]
per share. This represents an immediate decease in as adjusted net tangible book value of $[●] per share to existing shareholders
and immediate anti-dilution of $[●] per Share to new investors.
The following table illustrates this dilution
per Share in this offering:
| Assumed public offering price
per Share |
|
|
|
|
|
$ |
[●] |
|
| Net positive tangible book value per Share as of
June 30, 2024 reflecting adjustments |
|
|
7.60 |
|
|
|
|
|
| Decrease in net tangible
book value per Share attributable to new investors |
|
|
[●] |
|
|
|
|
|
| As adjusted net tangible book value per Share after
this offering |
|
|
[●] |
|
|
|
|
|
| Anti-Dilution per Share to new investors |
|
|
|
|
|
$ |
[●] |
|
To the extent that outstanding options are exercised,
new options or warrants are issued or we issue additional Shares in the future, there will be further dilution to new investors. We may
choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for
our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt
securities, the issuance of these securities could result in further dilution to our equity holders.
A $[●] increase in the assumed public
offering price of $[●] per Share, which is the reported sale price of our Shares on Nasdaq on [●], 2025, would increase (decrease)
our net tangible book value per Share after this offering by $[●] million and the dilution per Share to new investors by $[●],
assuming the number of Shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting
the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease
the number of Shares we are offering. The information discussed above is illustrative only and will adjust based on the actual public
offering price and other terms of the offering determined at pricing.
Management
Executive Officers and Directors
The following table sets forth our executive officers and directors,
their ages and the positions held by them:
| Name |
|
Age |
|
Position
Held |
|
| Mr. Yin Shenping |
|
55 |
|
Chief Executive Officer and Director |
|
| Ms. Liu Jia |
|
42 |
|
Chief Financial Officer and Director |
|
| Mr. Chen Guangqiang |
|
63 |
|
Chief Technology Officer, Chairman and Director |
|
| Mr. Hu Zhongchen |
|
72 |
|
Independent Director |
|
| Mr. Nelson N.S. Wong |
|
63 |
|
Independent Director (Audit Committee Chair) |
|
| Mr. Hu Jijun |
|
60 |
|
Independent Director |
|
| Dr. Duan Yonggang |
|
61 |
|
Independent Director |
|
Yin Shenping. Mr. Yin has been
our Chief Executive Officer and a director since the Company’s inception. In 2003, Mr. Yin founded Nanjing Recon, a Chinese
company that provides services to automate and enhance the extraction of petroleum in China, and has been the Chief Executive Officer
since that time. Prior to founding Nanjing Recon, Mr. Yin served as a sales manager for Fujian Haitian Network Company from 1992
through 1994. Mr. Yin has founded and operated a number of companies engaged in the IT industry including: Xiamen Hengda Haitian
Computer Network Co., Ltd. (1994), Baotou Hengda Haitian Computer Network Co., Ltd. (1997), Beijing Jingke Haitian Electronic Technology
Development Co., Ltd. (1999), and Jingsu Huasheng Information Technology Co., Ltd. (2000). Mr. Yin currently serves as Chairman of the
Board of Directors of HiTek Global Inc. (NASDAQ: HKIT) since 2017. In 2000, Mr. Yin merged the former Nanjing Kingsley Software
Engineering Co., Ltd. into Nanjing Recon. Mr. Yin received his bachelor’s degree in 1991 from Nanjing Agricultural University
in information systems. Mr. Yin was chosen as a director of the Company because as one of the founders of the Company, we believe
his knowledge of the Company and years of experience in our industry give him the ability to guide the Company as a director.
Liu Jia. Ms. Liu has served
as our Chief Financial Officer since 2008 and as our director since 2022. Ms. Liu received her bachelor’s degree in 2006 from
Beijing University of Chemical Technology, School of Economics and Management and her master’s degree in industrial economics in
2009 from Beijing Wuzi University. Ms. Liu is a certified U.S. CPA.
Chen Guangqiang. Mr. Chen has
served as our Chief Technology Officer and director since our inception. Mr. Chen was a geological engineer for the Fourth Oil Extraction
Plant of Huabei Oilfield from 1985 through 1993. From 1993 through 1999, Mr. Chen was a chief engineer for Xinda Company, CNPC Development
Bureau. From 1999 through 2003, Mr. Chen served as the general manager of Beijing Adar. Mr. Chen received his bachelor’s
degree in 1985 from Southwest Petroleum Institute. Mr. Chen was appointed to the position of director because he is one of the founders
of the Company and we believe we can benefit from his many years of engineering experience and management experience in the oil extraction
industry.
Nelson N.S. Wong. Mr. Wong joined
our board of directors in 2008. Prior to joining our Board, in 1990 Mr. Wong joined the Vigers Group, a real estate company that
provides services in valuation, corporate property services, investment advisory services, general practice surveying, building surveying,
commercial, in both retail and industrial agency, and property and facilities management. Mr. Wong became the Vice Chairman and
CEO of the Vigers Group in 1993. In 1995 Mr. Wong established the ACN Group, a business consulting firm, where he has worked continuously
and continues to serve as the Chairman and Managing Partner. Mr. Wong received a bachelor’s degree in arts from the PLA Institute
of International Relations in Nanjing in 1983. Mr. Wong was appointed to the position of director because we believe we can benefit
from his leadership skills and management experience.
Hu Jijun. Mr. Hu joined our board
of directors in 2008. Prior to joining our Board, from 1988 to 2003, Mr. Hu served in a variety of positions at No. 2 test-drill
plant, including technician of installation, assets equipment work, electrical installation, control room production dispatcher, Deputy
Chief Engineer of the Technology Battalion, and Deputy Director of Production. From 2003 to 2005 he served as Head of the Integrated
Battalion and he is currently the Head of the Transport Battalion, Senior Electric Engineer. Mr. Hu graduated as an automated professional
from the China University of Petroleum in 1988. Mr. Hu was appointed to the position of a director because we believe his years
of experience and knowledge gained while working at our No. 2 test-drill plant will prove beneficial to the guidance of the Company.
Zhao Shudong (from 2013 to October 2024).
Mr. Zhao joined our board of directors in 2013. Mr. Zhao spent over 30 years working in the oilfield industry prior to retiring from
full-time work in 2006. From 1970 to 1976, Mr. Zhao worked as a technician in the Daqing oilfield. From 1976 to 1982, Mr. Zhao served
as the vice director of the Hubei Oilfield Generalized Geologic Technical Research Institute. Mr. Zhao then spent 11 years as a director
and section chief at the Scientific and Technological Development Department of the Huabei Petroleum Administrative Bureau. He was subsequently
appointed Chief Geologist of the bureau, a position he held from 1993 to 1999. From 1999 to 2006, Mr. Zhao served as the General Manager
of the Huabei Oilfield Company of CNPC. Mr. Zhao studied at the Northeast Petroleum Institute from 1965 to 1970. Mr. Zhao was elected
as a director because of his extensive experience in the oilfield industry.
Duan Yonggang. Dr. Duan has served
as our director since March 2020. Dr. Duan has been teaching and researching in the oil-gas field development engineering area for a
long time. From November 2004, Dr. Duan has been a professor at Southwest Petroleum University in Sichuan, China. He is the director
of the oil well technology center of petroleum engineering school of Southwest Petroleum University. In addition, Dr. Duan is also a
researcher and Ph.D. supervisor. He has published over 60 articles on top academic journals and participated in writing six books. He
was named an expert with outstanding contributions and an oil-gas safety expert in Sichuan Province, China. Dr. Duan received his bachelor’s
degree in oil production in 1984, and his master degree in oil-gas field development engineering in 1988, both from Southwest Colleague.
Dr. Duan received his Ph.D. degree in oil-gas field development engineering in 2009 from Southwest Petroleum University. Dr. Duan
was chosen as a director because he is an expert in the oilfield area.
Hu Zhongchen. Mr. Hu joined our board
of directors in October 2024. Mr. Hu retired from Baotou Steel (Group) Co., Ltd. after having been employed from 1979 to 2014. Mr. Hu
received his bachelor’s degree in business management in 1979 from Inner Mongolia University of Technology. He possesses a China’s
Senior Economist certificate. Mr. Hu was chosen to serve as a director because of his expertise and experience in economic management
and deep understanding of China’s energy industry.
Employment Agreements
We have employment agreements with each of our
Chief Executive Officer, Chief Technology Officer and Chief Financial Officer. With the exception of the employment agreement with our
Chief Financial Officer, each of these employment agreements provides for an indefinite term. Such employment agreements may be terminated
(1) if the employee gives written notice of his or her intention to resign, (2) the employee is absent from three consecutive meetings
of the board of directors, without special leave of absence from the other members of the board of directors, and the board of directors
passes a resolution that such employee has vacated his office, or (3) the death, bankruptcy or mental incapacity of the employee. The
employment agreement for our Chief Financial Officer provides for a one-year term, which expired on March 12, 2017, and the parties have
continued to operate under the terms of this agreement since its expiration. Such employment agreement may be terminated if Ms. Liu gives
thirty days’ written notice of her intention to resign, or if the board of directors determines she can no longer perform her duties
as Chief Financial Officer and provides her with thirty days’ written notice of termination.
Under Chinese law, we may only terminate employment
agreements without cause and without penalty by providing notice of non-renewal one month prior to the date on which the employment agreement
is scheduled to expire. If we fail to provide this notice or if we wish to terminate an employment agreement in the absence of cause,
then we are obligated to pay the employee one month’s salary for each year we have employed the employee. We are, however, permitted
to terminate an employee for cause without penalty to our company, where the employee has committed a crime or the employee’s actions
or inactions have resulted in a material adverse effect to us.
Executive Compensation
The following table shows the annual compensation
paid by us to Yin Shenping, our Chief Executive Officer, Liu Jia, our Chief Financial Officer, and Chen Guangqiang, our Chief Technology
Officer, for the years ended June 30, 2023, 2022 and 2021. No other employee or officer received more than $100,000 in total compensation
in 2023, 2022 and 2021.
Summary Executive Compensation Table
| | |
| | |
| | |
| | |
Option | | |
Restricted Shares | | |
| |
| Name and principal position | |
Year | | |
Salary | | |
Bonus | | |
Awards | | |
Awards | | |
Total | |
| Yin Shenping, | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Principal Executive Officer | |
2024 | | |
$ | 600,000 | | |
$ | 180,000 | | |
$ | — | | |
$ | 1,186,674 | | |
$ | 1,966,674 | |
| | |
2023 | | |
$ | 620,000 | | |
$ | 150,000 | | |
$ | — | | |
$ | 1,515,000 | | |
$ | 2,285,000 | |
| | |
2022 | | |
$ | 360,000 | | |
$ | 100,000 | | |
$ | — | | |
$ | 2,934,500 | | |
$ | 3,394,500 | |
| Liu Jia | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Principal Financial Officer | |
2024 | | |
$ | 180,000 | | |
$ | 60,000 | | |
$ | — | | |
$ | 263,078 | | |
$ | 503,078 | |
| | |
2023 | | |
$ | 162,000 | | |
$ | 60,000 | | |
$ | — | | |
$ | 372,600 | | |
$ | 594,600 | |
| | |
2022 | | |
$ | 112,000 | | |
$ | 50,000 | | |
$ | — | | |
$ | 156,000 | | |
$ | 318,000 | |
| Chen Guangqiang, | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Chief Technology Officer | |
2024 | | |
$ | 600,000 | | |
$ | 180,000 | | |
$ | — | | |
$ | 1,186,674 | | |
$ | 1,966,674 | |
| | |
2023 | | |
$ | 620,000 | | |
$ | 150,000 | | |
$ | — | | |
$ | 1,515,000 | | |
$ | 2,285,000 | |
| | |
2022 | | |
$ | 395,833 | | |
$ | 100,000 | | |
$ | — | | |
$ | 2,934,000 | | |
$ | 3,430,333 | |
Director Compensation
All directors hold office until the expiration
of their respective terms and until their successors have been duly elected and qualified. There are no family relationships among our
directors or executive officers. Officers are elected by and serve at the discretion of the board of directors. Employee directors and
non-voting observers do not receive any compensation for their services. We pay $8,000 to each independent director annually for their
service as directors. In addition, non-employee directors are entitled to receive compensation for their actual travel expenses for each
board of directors meeting attended.
Summary Director Compensation Table
| | |
Fees earned | | |
| | |
| | |
| |
| | |
or | | |
Option | | |
Restricted Shares | | |
| |
| Name(1) | |
paid in cash | | |
Awards | | |
Awards | | |
Total | |
| Nelson N.S. Wong | |
$ | 8,000 | | |
$ | — | | |
| — | | |
$ | 8,000 | |
| Hu Jijun | |
$ | 8,000 | | |
$ | — | | |
| — | | |
$ | 8,000 | |
| Zhao Shudong
(2) | |
$ | 8,000 | | |
$ | — | | |
| — | | |
$ | 8,000 | |
| Duan Yonggang | |
$ | 8,000 | | |
$ | — | | |
| — | | |
$ | 8,000 | |
| Hu Zhongchen | |
$ | — | | |
$ | — | | |
| — | | |
$ | — | |
| (1) |
Compensation for our directors Yin Shenping, Chen Guangqiang and Liu Jia, who also serve as executive officers, is fully disclosed in the executive compensation table. |
| (2) | Zhao Shudong resigned on October 9, 2024. |
The following table summarizes, as of June
30, 2023, the outstanding options, unvested restricted share units and shares that we granted to our current directors and executive
officers, reflecting the previous one-for-five Reverse Share Split in 2019 and the recent one-for-eighteen 2024 Reverse Share Split.
| | |
Class A Ordinary Shares | | |
| | |
| |
|
| | |
underlying options | | |
| | |
| |
|
| | |
awarded/Restricted | | |
Exercise price | | |
| |
|
| Name | |
Share Units/Shares(1) | | |
(US$/share)(1) | | |
Date of grant | |
Date of expiration |
| Yin Shenping | |
| 125,000 | | |
| — | | |
02/26/2024 | |
02/25/2025 |
| Liu Jia | |
| 356 | | |
| 148.50 | | |
1/31/2015 | |
1/31/2025 |
| | |
| 2,778 | | |
| — | | |
02/28/2022 | |
02/27/2025 |
| | |
| 57,527 | | |
| — | | |
02/26/2024 | |
02/25/2025 |
| Chen Guangqiang | |
| 125,000 | | |
| — | | |
02/26/2024 | |
02/25/2025 |
| Nelson N.S. Wong | |
| 278 | | |
| 148.50 | | |
1/31/2015 | |
1/31/2025 |
| | |
| 1,666 | | |
| — | | |
02/28/2022 | |
02/27/2025 |
| | |
| 10,000 | | |
| — | | |
02/26/2024 | |
02/27/2025 |
| Hu Jijun | |
| 278 | | |
| 148.50 | | |
1/31/2015 | |
1/31/2025 |
| | |
| 1,666 | | |
| — | | |
02/28/2022 | |
02/27/2025 |
| | |
| 10,000 | | |
| — | | |
02/26/2024 | |
02/25/2025 |
| Zhao Shudong(2) | |
| 200 | | |
| 148.50 | | |
1/31/2015 | |
1/31/2025 |
| | |
| 1,666 | | |
| — | | |
02/28/2022 | |
02/27/2025 |
| | |
| 10,000 | | |
| — | | |
02/26/2024 | |
02/25/2025 |
| Duan Yonggang | |
| 1,666 | | |
| — | | |
02/28/2022 | |
02/27/2025 |
| | |
| 10,000 | | |
| — | | |
02/26/2024 | |
02/25/2025 |
| Total | |
| 358,081 | | |
| | | |
| |
|
| (1) | Retrospectively restated
for the 1-for-18 reverse share split on May 1, 2024. |
| (2) | Zhao Shudong resigned
on October 9, 2024. |
Board of Directors and Board Committees
Our board of directors currently consists of seven
members. There are no family relationships between any of our executive officers and directors.
The directors are divided into three classes, as nearly equal in number
as the then total number of directors permits. Class I directors faced re-election at our annual general meeting of shareholders in 2023
and every three years thereafter. Class II directors faced re-election at our annual general meeting of shareholders in 2024 and every
three years thereafter. Class III directors faced re-election at our annual general meeting of shareholders in 2021 and every three years
thereafter.
If the number of directors changes, any increase
or decrease will be apportioned among the classes so as to maintain the number of directors in each class as nearly as possible. Any additional
directors of a class elected to fill a vacancy resulting from an increase in such class will hold office for a term that coincides with
the remaining term of that class. Decreases in the number of directors will not shorten the term of any incumbent director. These board
provisions could make it more difficult for third parties to gain control of the Company by making it difficult to replace members of
our board of directors.
A director may vote in respect of any contract
or transaction in which he is interested, provided, however, that the nature of the interest of any director in any such contract or transaction
shall be disclosed by him at or prior to the board of directors consideration and any vote on that matter. A general notice or disclosure
to the directors, or otherwise contained in the minutes of a meeting or a written resolution of the directors or any committee thereof
that a director is a shareholder of any specified firm or company and is to be regarded as interested in any transaction with such firm
or company shall be sufficient disclosure and after such general notice it shall not be necessary to give special notice relating to any
particular transaction.
There are no membership qualifications for directors.
Further, there are no share ownership qualifications for directors unless so fixed by us in a general meeting.
The board of directors maintains a majority of
independent directors who are deemed to be independent under the definition of independence provided by NASDAQ Stock Market Rule 4200(a)(15).
Mr. Zhao, Mr. Wong, Mr. Hu and Dr. Duan are our independent directors.
We do not have a lead independent director because
of the foregoing reason because we believe our independent directors are encouraged to freely voice their opinions on a relatively small
company board.
Our board of directors plays a significant role
in our risk oversight. The board of directors makes all relevant Company decisions. As such, it is important for us to have our Chief
Executive Officer serve on the Board as he plays a key role in the risk oversight of the Company. As a smaller reporting company with
a small board of directors, we believe it is appropriate to have the involvement and input of all of our directors in risk oversight matters.
Currently, three committees have been established
under the board: the audit committee, the compensation committee and the nominating committee. All of these committees consist solely
of independent directors.
The audit committee is responsible for overseeing
the accounting and financial reporting processes of the Company and audits of the financial statements of the Company, including the appointment,
compensation and oversight of the work of our independent auditors. Mr. Wong qualifies as the audit committee financial expert and
serves as the chair of the audit committee.
The compensation committee of the board of directors
reviews and makes recommendations to the board regarding our compensation policies for our officers and all forms of compensation, and
also administers our incentive compensation plans and equity-based plans (but our board retains the authority to interpret those plans).
Mr. Hu serves as the chair of the compensation committee.
The nominating committee of the board of directors
is responsible for the assessment of the performance of the board, considering and making recommendations to the board with respect to
the nominations or elections of directors and other governance issues. The nominating committee considers diversity of opinion and experience
when nominating directors. Mr. Zhao serves as the chair of the nominating committee.
There are no other arrangements or understandings
pursuant to which our directors are selected or nominated.
Duties of Directors
Under Cayman Islands law, our directors have a
fiduciary duty to the Company to act in good faith in their dealings with or on behalf of the Company and exercise their powers and fulfill
the duties of their office honestly. This duty has four essential elements:
| |
· |
a duty to act in good faith in the best interests of the Company; |
| |
· |
a duty not to personally profit from opportunities that arise from the office of director; |
| |
· |
a duty to avoid conflicts of interest; and |
| |
· |
a duty to exercise powers for the purpose for which such powers were intended. |
In general, Cayman Islands law imposes various
duties on directors of a company with respect to certain matters of management and administration of the Company. In addition to the remedies
available under general law, the Companies Law imposes fines on directors who fail to satisfy some of these requirements. However, in
many circumstances, an individual is only liable if he is knowingly guilty of the default or knowingly and willfully authorizes or permits
the default. In comparison, under Delaware law, the business and affairs of a corporation are managed by or under the direction of its
board of directors. In exercising their powers, directors are charged with a fiduciary duty of care to protect the interests of the corporation
and a fiduciary duty of loyalty to act in the best interests of its shareholders. In addition, under Delaware law, a party challenging
the propriety of a decision of the directors bears the burden of rebutting the applicability of the presumptions afforded to directors
by the “business judgment rule.” If the presumption is not rebutted, the business judgment rule protects the directors and
their decisions, and their business judgments will not be second guessed. If the presumption is rebutted, the directors bear the burden
of demonstrating the entire fairness of the relevant transaction. Notwithstanding the foregoing, Delaware courts subject directors’
conduct to enhanced scrutiny in respect of defensive actions taken in response to a threat to corporate control and approval of a transaction
resulting in a sale of control of the corporation.
Limitation of Director and Officer Liability
Pursuant to our Memorandum and Articles of Association,
every director or officer and the personal representatives of the same shall be indemnified and held harmless out of our assets and funds
against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained by him or her in or about
the conduct of our business or affairs or in the execution or discharge of his or her duties, powers, authorities or discretions, including
without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by him in defending (whether
successfully or otherwise) any civil proceedings concerning us or our affairs in any court whether in the Cayman Islands or elsewhere.
No such director or officer will be liable for: (a) the acts, receipts, neglects, defaults or omissions of any other such Director
or officer or agent; or (b) any loss on account of defect of title to any of our properties; or (c) account of the insufficiency
of any security in or upon which any of our money shall be invested; or (d) any loss incurred through any bank, broker or other similar
person; or (e) any loss occasioned by any negligence, default, breach of duty, breach of trust, error of judgment or oversight on
his or her part; or (f) any loss, damage or misfortune whatsoever which may happen in or arise from the execution or discharge of
the duties, powers authorities, or discretions of his or her office or in relation thereto, unless the same shall happen through his or
her own dishonesty, gross negligence or willful default.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors
or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a
party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining
the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation
of federal or state securities or commodities laws, any laws respecting financial institutions or insurance companies, any law or regulation
prohibiting mail or wire fraud in connection with any business entity or been subject to any disciplinary sanctions or orders imposed
by a stock, commodities or derivatives exchange or other self-regulatory organization, except for matters that were dismissed without
sanction or settlement.
Employees
As of June 30, 2024, we employed a total of 188 full-time in the
following functions:
| | |
Number of Employees | |
| | |
June 30, | | |
June 30, | | |
June 30, | |
| Department | |
2024 | | |
2023 | | |
2022 | |
| Senior Management | |
| 11 | | |
| 20 | | |
| 27 | |
| Human Resource & Administration | |
| 10 | | |
| 26 | | |
| 25 | |
| Finance | |
| 17 | | |
| 11 | | |
| 13 | |
| Research & Development & Technology | |
| 68 | | |
| 64 | | |
| 53 | |
| Procurement and production | |
| 35 | | |
| 27 | | |
| 26 | |
| Sales & Marketing | |
| 43 | | |
| 40 | | |
| 44 | |
| Total | |
| 184 | | |
| 188 | | |
| 188 | |
Our employees are not represented by a labor organization
or covered by a collective bargaining agreement. We have not experienced any work stoppages.
We are required under PRC law to make contributions
to employee benefit plans at specified percentages of our after-tax profit. In addition, we are required by PRC law to cover employees
in China with various types of social insurance. In fiscal year 2024, we contributed approximately $418,587 to the employee benefit plans
and social insurance. In fiscal year 2023, we contributed approximately $382,791 to the employee benefit plans and social insurance.
In fiscal year 2022, we contributed approximately $427,614 to the employee benefit plans and social insurance. The effect on our liquidity
by the payments for these contributions is immaterial. We believe that we are in material compliance with the relevant PRC employment
laws.
Share Ownership
Share Option Pool
In connection with our initial public offering,
we established a pool for share options as our 2009 Stock Incentive Plan (“2009 Incentive Plan”) for the Domestic Companies’
and our employees. This pool initially contained options to purchase up to 158,073 (8,782 shares post 2024 Reverse Split) of our Class
A Ordinary Shares. The options will vest at a rate of 20% per year for five years and have an exercise price of the market price of our
shares on the date the options are granted. To date, we issued 112,800 (6,267 options post 2024 Reverse Split) options and 45,273 (2,515
shares post 2024 Reverse Split) shares out of this employee share option pool. We initially granted 58,600 (3,256 options post 2024 Reverse
Split) options in 2009. We held a shareholder meeting in December 2010 and announced the resignation of three directors, and as a result,
20,000 (1,111 options post 2024 Reverse Split) options were forfeited and went back in the pool. In 2012, we granted an additional 83,000
(4,611 options post 2024 Reverse Split) options and 8,800 (489 options post 2024 Reverse Split) options were forfeited and went back
to the pool. In the three months ended June 30, 2014, 29,680 (1,649 options post 2024 Reverse Split) vested options from 2012 grants
were exercised. During the year ended June 30, 2024, we have 0 options outstanding under the 2009 Incentive Plan.
On January 29, 2015, the Company held its
2014 annual general meeting of shareholders, during which the Company’s shareholders approved the Company’s 2015 Stock Incentive
Plan (“2015 Incentive Plan”). Pursuant to the 2015 Incentive Plan, we were initially authorized to issue up to an aggregate
of 140,000 (7,778 shares post 2024 Reverse Split) Class A Ordinary Shares. Additionally, commencing on the first business day in fiscal
year ending June 30, 2016 and on the first business day of each fiscal year thereafter while the 2015 Incentive Plan is in effect, the
maximum number of Class A Ordinary Shares available for issuance under this 2015 Incentive Plan during that fiscal year shall be increased
such that, as of such first business day, the maximum aggregate number of Class A Ordinary Shares available for issuance under this 2015
Incentive Plan during that fiscal year shall be equal to Fifteen Percent (15%) of the number of total issued and outstanding Class A
Ordinary Shares of the Company as recorded by the Company’s transfer agent on the last business day of the prior fiscal year. The
Company granted options to purchase 80,000 (4,444 shares post 2024 Reverse Split) Class A Ordinary Shares to its employees and non-employee
director on January 31, 2015 under the 2015 Incentive Plan. As of June 30, 2024, we have an aggregate of 80,000 (4,456 options post 2024
Reverse Split) options outstanding under the 2015 Incentive Plan.
On April 5, 2021, the Company held its 2020
annual general meeting of shareholders, during which the Company’s shareholders approved the Company’s 2021 Equity Incentive
Plan (“2021 Incentive Plan”). As of June 30, 2024, we have 0 options outstanding under the 2021 Incentive Plan.
Executive Class A Ordinary Shares Grants
On February 28, 2022, the Company’s board
granted 1,642,331 (91,241 shares post 2024 Reverse Split) Class A Ordinary Shares pursuant to its 2015 Equity Incentive Plan to the employees
of the Company, at a fair value of $1,708,024, with a vesting period of three years from the date of the grant.
On March 15, 2023, the Company’s board
granted 1,000,000 (55,556 shares post 2024 Reverse Split) Class A Ordinary Shares to the employees of the Company, at a fair value of
$372,600, with a vesting period of six months from the date of the grant.
On February 26, 2024, the Company’s
board granted 6,255,483 (347,527 shares post 2024 Reverse Split) Class A Ordinary Shares pursuant to its 2015 Equity Incentive Plan to
the employees of the Company, at a fair value of $2,130,000, with a vesting period of one year from the date of the grant.
As of June 30, 2024, we have 6,802,926 (377,939
shares post 2024 Reverse Split) non-vested restricted shares outstanding under such grant.
Executive Class B Ordinary Shares Grants
On February 28, 2022, the Company’s board
approved a grant of 1,600,000 Class B Ordinary Shares to its management as compensation cost for awards. The fair value of the restricted
shares was $1,694,000 based on the fair value of share price $1.06 at February 28, 2022. These restricted shares vested immediately on
the grant date. All granted shares under this plan are issued and outstanding on February 28, 2022.
On March 9, 2023, the Company’s board approved a grant of 3,000,000 restricted shares to its management as compensation cost for
awards. The fair value of the restricted shares was $3,025,000 based on the fair value of share price $1.01 at March 9, 2023. These restricted
shares vested immediately on the grant date. All granted shares under this plan are issued and outstanding on March 9, 2023.
On February 26, 2024, the Company’s
board approved a grant of 12,900,000 restricted shares to its management as compensation cost for awards. The fair value of the restricted
shares was $2,130,000 based on the fair value of share price $0.17 at February 26, 2023. These restricted shares vested immediately on
the grant date. As of June 30, 2024, all granted shares under this plan are not issued and outstanding.
Plan
of Distribution
AC Sunshine Securities LLC, or ACSS, has agreed
to act as our exclusive placement agent on a reasonable best efforts basis in connection with this offering subject to the terms and
conditions of a placement agent agreement, dated [●], 2025 between ACSS and us. The placement agent is not purchasing or selling
any shares in this offering, nor is it required to arrange for the purchase and sale of any specific number or dollar amounts of such
securities, other than to use their “reasonable best efforts” to arrange for the sale of the securities offered hereby. The
public offering price of the securities in this offering has been determined based upon arm’s-length negotiations between the purchasers
and us. The placement agent may engage sub-agents or selected dealers to assist with this offering. The placement agent agreement will
provide certain representations, warranties and covenants, including indemnifications, from us. Our obligation to issue and sell the
securities to the investors is subject to the closing conditions set forth in the placement agent agreement, including the absence of
any material adverse change in our business and the receipt of certain opinions, letters and certificates from us or our counsel, which
may be waived by the respective parties. All of the shares will be sold at the offering price specified in this prospectus supplement
and, we expect, at a single closing.
Commissions and Expenses
We
have agreed to pay the placement agent an aggregate cash placement fee equal to five percent (5.0%) of the gross proceeds in this offering
from sales arranged for by the placement agent.
Subject to certain conditions, we have also agreed to pay the following
expenses relating to this offering: (a) all filing fees and expenses relating to the registration with the SEC of the securities
sold in this offering; (b) all FINRA public offering filing fees; (c) all fees and expenses relating to the listing of the Company’s
equity or equity-linked securities on the Nasdaq Stock Exchange; (d) all fees, expenses and disbursements relating to the registration
or qualification of the securities under the “blue sky” securities laws of such states and other jurisdictions as the placement
agent may reasonably designate (including, without limitation, all filing and registration fees, and the reasonable fees and disbursements
of the Company’s “blue sky” counsel, which will be placement agent’s counsel) unless such filings are not required
in connection with the Company’s proposed listing with Nasdaq; (e) all fees, expenses and disbursements relating to the registration,
qualification or exemption of the securities under the securities laws of such foreign jurisdictions as the placement agent may reasonably
designate; (f) the costs of all mailing and printing of the offering documents; (g) transfer and/or stamp taxes, if any, payable
upon the transfer of securities from the Company to the placement agent; (h) the fees and expenses of the Company’s accountants;
and (i) reasonable legal fees and disbursements for placement agent’s counsel. The maximum amount of above-mentioned fees and
expenses shall not exceed $170,000.
Determination of Offering Price
The public offering price of the securities we
are offering was negotiated between us and the investors, in consultation with the placement agent based on the trading of our Shares
prior to the offering, among other things. Other factors considered in determining the public offering price of the securities we are
offering include our history and prospects, the stage of development of our business, our business plans for the future and the extent
to which they have been implemented, an assessment of our management, general conditions of the securities markets at the time of the
offering and such other factors as were deemed relevant.
Passive Market Making
In connection with this offering, the placement
agent may engage in passive market making transactions in our ordinary shares on the Nasdaq Stock Market in accordance with Rule 103
of Regulation M promulgated under the Exchange Act during a period before the commencement of offers or sales of ordinary shares and
extending through the completion of the distribution.
Indemnification
We have agreed to indemnify the placement agent
against certain liabilities, including liabilities under the Securities Act, and liabilities arising from breaches of representations
and warranties contained in the placement agent agreement, or to contribute to payments that the placement agent may be required to
make in respect of those liabilities.
Potential Conflicts of Interest
The placement agent and its affiliates may, from
time to time, engage in transactions with and perform services for us in the ordinary course of their business for which it may receive
customary fees and reimbursement of expenses. In the ordinary course of its various business activities, the placement agent and its
affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities)
and financial instruments (including bank loans) for its own accounts and for the accounts of its customers and such investment and securities
activities may involve securities and/or instruments of our Company. The placement agent and is affiliates may also make investment recommendations
and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend
to clients that they acquire, long and/or short positions in such securities and instruments.
Electronic Distribution
This prospectus may be made available in electronic
format on websites or through other online services maintained by the placement agent or by an affiliate. Other than this prospectus,
the information on the placement agent’s website and any information contained in any other website maintained by the placement
agent is not part of this prospectus supplement and the accompanying base prospectus or the registration statement of which this prospectus
supplement and the accompanying base prospectus forms a part, has not been approved and/or endorsed by us or the placement agent, and
should not be relied upon by investors.
Expenses
Relating To This Offering
Set forth below is an itemization of the total
expenses, excluding underwriting discounts and commissions, that we expect to incur in connection with this offering. With the exception
of the SEC registration fee, all amounts are estimates.
| Securities
and Exchange Commission Registration Fee |
|
|
6,014 |
|
| Legal Fees and Expenses |
|
|
243,571 |
|
| Accounting Fees and
Expenses |
|
|
61,500 |
|
| Miscellaneous
Expenses |
|
|
220,000 |
|
| Total
Expenses |
|
$ |
531,085 |
|
Description
of Securities
We (Recon Technology, Ltd) are a Cayman Islands
exempted company with limited liability duly registered with the Cayman Islands Registrar of Companies. Our affairs are governed by our
Fourth Amended and Restated Memorandum and Articles of Association, the Companies Act (as revised) of the Cayman Islands, which is referred
to as the Companies Act below, and the laws of the Cayman Islands. Our corporate purposes are unrestricted and we have the authority
to carry out any object not prohibited by any law as provided by Section 7(4) of the Companies Act.
Our
authorized share capital consists of US$58,000 divided into 500,000,000 Class A ordinary shares of a nominal or par value of US$0.0001
each and 80,000,000 Class B ordinary shares of a nominal or par value of US$0.0001 each. As of the date of this prospectus, 7,987,959
Class A ordinary shares and 20,000,000 Class B ordinary shares are issued and outstanding. We have issued and outstanding 4,456
options from our share option pool.
Ordinary Shares
Holders of Class A Ordinary Shares are entitled
to cast one vote for each share on all matters submitted to a vote of shareholders, including the election of directors and auditor.
Holders of Class B Ordinary Shares are entitled to cast fifteen votes on all matters submitted to a vote of shareholders, including
the election of directors and auditor. The holders of all ordinary shares are entitled to receive ratably such dividends, if any, as
may be declared by the Board of Directors out of funds legally available therefor and subject to any preference of any then authorized
and issued preferred shares. Such holders do not have any preemptive rights to subscribe for additional shares. All holders of ordinary
shares are entitled to share ratably in any assets for distribution to shareholders upon the liquidation, dissolution or winding up of
the Company, subject to any preference of any then authorized and issued preferred shares. All outstanding ordinary shares are fully
paid and non-assessable.
On March 29, 2024, the Company held its
annual meeting, at which the Company’s shareholders approved (i) a capital increase to the authorised share capital by the
creation of 350,000,000 additional Class A Shares with a nominal or par value of US$0.0925 each and 60,000,000 Class B ordinary
shares with a nominal or par value of US$0.0925 each; (ii) a share consolidation or reverse share split of only the Class A
Shares, at a ratio of one-for-eighteen (the “2024 Reverse Share Split”), such that there were then 27,694,610.80 Class A
Shares with a nominal or par value of US$1.67 (together with 60,000,000 Class B ordinary shares with a nominal or par value of US$0.0925
each); (iii) a subsequent share subdivision of all shares at a ratio of 1:17,349.9459 into 480,500,000,000 Class A Shares with
a nominal or par value of US$0.0001 each and 56,000,000,000 Class B ordinary shares with a nominal or par value of US$0.0001 each;
and (iv) a final capital reduction by the cancellation of 480,000,000,000 unissued Class A Shares and the cancellation of 55,920,000,000
unissued Class B ordinary shares, such that the final authorized share capital of the Company, following each of the above stages
was amended from: US$15,725,000 divided into 150,000,000 Class A ordinary shares of a nominal or par value of US$0.0925 each, and
20,000,000 Class B ordinary shares of a nominal or par value of US$0.0925 each, to: US$58,000 divided into 500,000,000 Class A
Shares of a nominal or par value of US$0.0001 each and 80,000,000 Class B ordinary shares of a nominal or par value of US$0.0001
each (collectively, the “Capital Amendment”). No fractional ordinary shares were issued to any shareholders in connection
with the Capital Amendment. Each shareholder will be entitled to receive one ordinary share in lieu of the fractional share that would
have resulted from the Capital Amendment.
Preferred Shares
Pursuant to our Articles and Cayman Islands law,
our Company may by Special Resolution establish one or more series of preferred shares having such number of shares, designations, relative
voting rights, dividend rates, liquidation and other rights, preferences, powers and limitations as may be fixed by the Special Resolution.
Any preferred shares issued will include restrictions on voting and transfer intended to avoid having us constitute a “controlled
foreign corporation” for United States federal income tax purposes. Such rights, preferences, powers and limitations as may be
established could have the effect of discouraging an attempt to obtain control of us. The issuance of preferred shares could also adversely
affect the voting power of the holders of the ordinary shares deny shareholders the receipt of a premium on their ordinary shares in
the event of a tender or other offer for the ordinary shares and have a depressive effect on the market price of the ordinary shares.
Class B ordinary shares
Under the Fourth Amended and Restated Memorandum
and Articles of Association of the Company, each Class B ordinary share is convertible into one-eighteenth (1/18) of one Class A
Share at any time by the holder. The number of Class B ordinary shares held by a holder will be automatically and immediately converted
into corresponding number of Class A Shares in the ratio of 1/18 upon any direct or indirect sale, transfer, assignment or disposition
of such number of Class B ordinary shares by the holder. Furthermore, Class A Shares are not convertible into Class B
ordinary shares under any circumstances. Finally, except for voting rights and conversion rights as set forth in the Fourth Amended and
Restated Memorandum and Articles of Association of the Company, the Class A Shares and the Class B ordinary shares shall have
the same rights, preferences, privileges and restrictions.
Limitations on the Right to Own Shares
There are no limitations on the right to own our shares.
Changes in Capital
We may from time to time by ordinary resolution
increase the share capital by such sum, to be divided into shares of such amount, as the resolution shall prescribe. An ordinary resolution
is a resolution that must be approved by holders of a majority of outstanding voting shares to become effective. The new shares shall
be subject to the same provisions with reference to the payment of calls, lien, transfer, transmission, forfeiture and otherwise as the
shares in the original share capital. We may by ordinary resolution:
| · | consolidate
and divide all or any of our share capital into shares of larger amount than our existing
shares; |
| · | in
many circumstances, sub-divide our existing shares, or any of them, into shares of smaller
amount provided that in the subdivision the proportion between the amount paid and the amount,
if any, unpaid on each reduced share shall be the same as it was in the case of the share
form which the reduced share is derived; and |
| · | cancel
any shares which, at the date of the passing of the resolution, have not been taken or agreed
to be taken by any person and diminish the amount of its share capital by the amount of the
shares so cancelled. |
We may by Special Resolution and subject to the
provisions of Cayman Islands law, carry out a capital reduction. Our Articles of Association provide that a Special Resolution is also
required to reduce any capital redemption reserve fund. A special resolution is a resolution that must be approved by holders of more
than two-thirds (2/3) of the outstanding voting shares to become effective, provided, however a company’s Articles of Association
may impose a higher threshold. Our Articles of Association require that Special Resolutions receive at least two-thirds (2/3) approval.
Corporate Governance
| · | We
have adopted NASDAQ-mandated corporate governance measures, including a Board of Directors
comprised of a majority of independent directors. We have established an Audit Committee,
a Nominating Committee and a Compensation Committee, and each committee is comprised solely
of independent directors. We have also adopted a Code of Ethics and have taken other steps
to ensure proper corporate governance. |
| · | Under
Cayman Islands law, our Directors have a fiduciary duty to the Company. They have a duty
to act in good faith in their dealings with or on behalf of our company and exercise their
powers and fulfill the duties of their office honestly. These duties have four essential
elements: (i) a duty to act in good faith in the best interests of the Company; (ii) a
duty not to personally profit from opportunities that arise from the office of director;
(iii) a duty to avoid conflicts of interest; and (iv) a duty to exercise the powers
of a director for the purpose for which such powers were intended. |
| · | Cayman
Islands law and our Articles of Association provide that shareholders may approve matters
by way of a unanimous written resolution signed by or on behalf of each shareholder who would
have been entitled to vote on such matter at a general meeting without a meeting being held. |
| · | Cayman
Islands law and our Articles of Association allow our shareholders holding not less than
ten percent (10%) of the paid up voting share capital of the Company to requisition a shareholder’s
meeting. As an exempted Cayman Islands company, we are not obliged by law to call shareholders’
annual general meetings. However, our Articles of Association require us to call such meetings. |
| · | Under
our Articles of Association, directors can be removed with cause or by a special resolution
(being the vote of holders of a two thirds majority of our shares), cast at a general meeting,
or the unanimous written resolution of all shareholders. |
| · | All
material related party transactions must be approved by our board of directors. Such material
related party transactions must be made or entered into on bona fide terms in the best interests
of the Company and not with the effect of constituting a fraud on the minority shareholders. |
| · | Under
the Companies Act of the Cayman Islands and our Articles of Association, our Company may
be voluntarily dissolved, liquidated or wound up only by the vote of holders of two-thirds
of our shares voting at a meeting or by ordinary resolutions at a meeting if the Company
is no longer able to pay its debts as they fall due or in each case by the unanimous written
resolution of all shareholders. In addition, our Company may be wound up by the Grand Court
of the Cayman Islands if the Company is unable to pay its debts or if the court is of the
opinion that it is just and equitable that our company be wound up. |
| · | Our
Memorandum and Articles of Association permit indemnification of officers and directors for
losses, damages, costs and expenses incurred in their capacities as such unless such losses
or damages arise from fraud, willful neglect or default of such directors or officers. Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted
to our directors, officers or persons controlling us under the foregoing provisions, we have
been informed that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable
as a matter of United States law. |
| · | There
are no limitations imposed by our Memorandum and Articles of Association on the rights of
non-resident or foreign shareholders to hold or exercise voting rights on our shares. In
addition, there are no provisions in our Memorandum and Articles of Association governing
the ownership threshold above which shareholder ownership must be disclosed. |
| · | Holders
of our ordinary shares will have no general right under Cayman Islands law to inspect or
obtain copies of our list of shareholders or corporate records except our Memorandum and
Articles of Association. However, we will provide our shareholders with annual audited consolidated
financial statements. |
Anti-takeover Effects
| · | Our
board of directors is divided into three (3) classes of directors. The current terms
of the directors expire in 2023, 2024 and 2025. Directors of each class are chosen for three-year
terms upon the expiration of their current terms, and each year one class of directors is
elected by the shareholders. The staggered terms of our directors may reduce the possibility
of a tender offer or an attempt at a change in control, even though a tender offer or change
in control might be in the best interest of our shareholders. |
| · | As
permitted under Cayman Islands law, our Articles of Association do not provide for cumulative
voting. |
| · | A
plan of merger or consolidation must be approved by (i) a shareholder resolution of
each constituent company by a special resolution (being a 2/3rd majority). |
| · | When
a take-over offer is made and accepted (within four (4) months) by holders of not less
than 90% of the shares affected, the offeror may, within a two (2) month period, require
the holders of the remaining shares to transfer such shares on the terms of the offer. An
objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed
unless there is evidence of fraud, bad faith or collusion. If the arrangement and reconstruction
is thus approved, the dissenting shareholder would have no rights comparable to appraisal
rights. |
| · | Under
Cayman Islands law and our Articles of Association, if at any time the share capital is divided
into more than one class of shares, the rights attached to any class (unless otherwise provided
by the terms of issue of the shares of that class) may be varied with the consent in writing
of the shareholders of two thirds (2/3) of the issued shares of that class or with the sanction
of a resolution passed by not less than two thirds (2/3) of such holders of the shares of
that class. |
| · | As
permitted by Cayman Islands law, our Memorandum and Articles of Association may only be amended
by way of a Special Resolution with the vote of holders of two-thirds (2/3) of our shares
voting at a meeting or the unanimous written resolution of all shareholders. |
Stock Option Plan
As of the date of this prospectus, there were
outstanding options to purchase 4,456 of ordinary shares issued out of our share option pool.
Listing
Our ordinary shares are listed on the Nasdaq
Capital Market under the trading symbol “RCON”.
Transfer Agent and Registrar
The transfer agent and registrar for our ordinary
shares is VStock Transfer, LLC located in 18 Lafayette Place, Woodmere, New York 11598 U.S. Our transfer agent’s phone number is
+1 (212) 828-8436.
Common Warrants
The following summary of certain terms and
provisions of the Common Warrants offered together with the Shares hereby is not complete and is subject to, and qualified in its entirety
by, the provisions of the warrant agent agreement between us and Computershare Limited, as warrant agent, and the form of Common Warrant,
both of which are filed as exhibits to the registration statement of which this prospectus is a part. Prospective investors should carefully
review the terms and provisions set forth in the warrant agent agreement, including the annexes thereto, and form of Common Warrant.
Exercisability. The Common Warrants
are exercisable at any time after their original issuance and at any time up to the date that is five years after their original issuance.
The Warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice
and, at any time a registration statement registering the issuance of the Shares underlying the warrants under the Securities Act is
effective and available for the issuance of such shares, by payment in full in immediately available funds for the number of Shares purchased
upon such exercise. The Company will make its best effort to maintain an effective registrations statement registering the issuance of
Shares underlying the warrants under the Securities Act. If such a registration is not effective or available the holder may, in its
sole discretion, elect to exercise the Warrant through a cashless exercise, in which case the holder would receive upon such exercise
the net number of Shares determined according to the formula set forth in the Warrant. No fractional shares will be issued in connection
with the exercise of a Warrant. In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount
multiplied by the exercise price.
Exercise Limitation. A holder will
not have the right to exercise any portion of the warrant if the holder (together with its affiliates) would beneficially own in excess
of 4.99% of the number of Shares outstanding immediately after giving effect to the exercise, as such percentage ownership is determined
in accordance with the terms of the Common Warrants. However, any holder may increase or decrease such percentage to any other percentage
not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days following notice from the
holder to us.
Exercise Price. The exercise price
per whole Share purchasable upon exercise of the Common Warrants is $[●] per share, which is 100% of the public offering price
of the Units. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock
splits, stock combinations, reclassifications or similar events affecting our Shares and also upon any distributions of assets, including
cash, stock or other property to our stockholders.
Transferability. Subject to applicable
laws, the Warrants may be offered for sale, sold, transferred or assigned without our consent.
Exchange Listing. We do not intend
to apply to list the Common Warrants on any securities exchange or nationally recognized trading system.
Fundamental Transactions. In the
event of a fundamental transaction, as described in the Common Warrants and generally including any reorganization, recapitalization
or reclassification of our Shares, the sale, transfer or other disposition of all or substantially all of our properties or assets, our
consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding Shares, or any person or group
becoming the beneficial owner of more than 50% of the voting power represented by our outstanding Shares, the holders of the Common Warrants
will be entitled to receive upon exercise of the Common Warrants the kind and amount of securities, cash or other property that the holders
would have received had they exercised the Common Warrants immediately prior to such fundamental transaction without regard to any limitations
on exercised contained in the Common Warrants.
Rights as a Stockholder. Except as
otherwise provided in the Common Warrants or by virtue of such holder’s ownership of our Shares, the holder of a Common Warrant
does not have the rights or privileges of a holder of our Shares, including any voting rights, until the holder exercises the Common
Warrant.
Governing Law. The Warrants and the warrant agent agreement
are governed by New York law.
Enforceability
of Civil Liabilities
We are incorporated under the laws of the Cayman
Islands as an exempted company with limited liability. We are incorporated in the Cayman Islands because of certain benefits associated
with being a Cayman Islands exempted company, such as political and economic stability, an effective judicial system, a favorable tax
system, the absence of exchange control or currency restrictions and the availability of professional and support services. However,
the Cayman Islands has a less developed body of securities laws as compared to the United States and provides protections for investors
to a lesser extent. In addition, Cayman Islands companies may not have standing to sue before the federal courts of the United States.
Substantially all of our assets are located outside
the United States. In addition, a majority of our directors and officers are nationals and/or residents of countries other than the United
States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be
difficult for investors to effect service of process within the United States upon us or such persons or to enforce against them or against
us, judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities
laws of the United States or any state thereof.
We have appointed CT Corporation System (28 Liberty
St. New York, NY 10005) as our agent to receive service of process with respect to any action brought against us in the United States
District Court for the Southern District of New York under the federal securities laws of the United States or under the securities laws
of the State of New York.
We have been advised by Campbells LLP, our counsel
as to Cayman Islands law, that the United States and the Cayman Islands do not have a treaty providing for reciprocal recognition and
enforcement of judgments of courts of the United States in civil and commercial matters and that a final judgment for the payment of
money rendered by any general or state court in the United States based on civil liability, whether or not predicated solely upon the
U.S. federal securities laws, is unlikely to be enforceable in the Cayman Islands. We have also been advised by Campbells LLP that a
final and conclusive judgment obtained in U.S. federal or state courts under which a sum of money is payable as compensatory damages
(i.e., not being a sum claimed by a revenue authority for taxes or other charges of a similar nature by a governmental authority, or
in respect of a fine or penalty or multiple or punitive damages) may be the subject of an action on a debt in the court of the Cayman
Islands under the common law doctrine of obligation. A Cayman Islands court may impose civil liability on us or our directors or officers
in a suit brought in the Cayman Islands against us or these persons with respect to a violation of U.S. federal securities laws, provided
that the facts surrounding any violation constitute or give rise to a cause of action under Cayman Islands law.
Legal
Matters
Kaufman & Canoles, P.C., Richmond, Virginia
is acting as counsel to our company regarding U.S. securities law matters. The validity of the securities being offered herein is being
passed upon for us by Campbells LLP, Grand Cayman, Cayman Islands. Certain legal matters as to PRC law will be passed upon for us by Jingtian
& Gongcheng. Kaufman & Canoles, P.C. may rely upon Jingtian & Gongcheng with respect to matters governed by PRC law and on
Campbells LLP with respect to matters governed by Cayman law.
VCL Law LLP is acting as counsel to the underwriter with respect to
U.S. securities law. Certain legal matters as to PRC law will be passed upon for the underwriter by Allbright Law Offices (Fuzhou). VCL
Law LLP may rely upon Allbright Law Offices (Fuzhou) with respect to matters governed by PRC law.
Experts
The
financial statements incorporated by reference in this prospectus for the years ended June 30, 2022 have been audited by
Friedman LLP. The financial statements incorporated by reference in this prospectus for the years ended June 30, 2023 and June 30,
2024 have been audited by Enrome LLP. Both independent registered public accounting firms, as set forth in their reports thereon included
therein, and incorporated herein by reference, and are included in reliance upon such report given on the authority of such firm as experts
in accounting and auditing.
Change
in Registrant’s Certifying Accountant
On August 22, 2023, we appointed Enrome LLP
(“Enrome”) as its independent registered public accounting firm, effective on the same day. Enrome replaced Marcum Asia CPAs
LLP (“Marcum Asia”), our former independent registered public accounting firm, which we dismissed on August 22, 2023. The
appointment of Enrome was made after careful consideration and evaluation process by the Company and has been approved by the audit committee
of our board of directors. Our decision to make this change was not the result of any disagreement between the Company and Marcum Asia
on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
During the two most recent fiscal years ended
June 30, 2021 and 2022 and any subsequent interim period prior to engaging Enrome, neither the Company nor anyone on its behalf consulted
Enrome regarding either (i) the application of accounting principles to any proposed or completed transaction, or the type of audit opinion
that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided to the Company
that Enrome concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial
reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 16F(a)(1)(iv) of Form 20-F and the
related instructions to Item 16F of Form 20-F) or any reportable events as described in Item 16F(a)(1)(v) of Form 20-F.
Previously, on February 7, 2023, the Company’s
board of directors determined and ratified the audit committee’s approval of the proposed appointment of Marcum Asia as the Company’s
independent registered public accounting firm. The services previously provided by Friedman were then provided by Marcum Asia up until
its dismissal on August 22, 2023.
The Company was notified by Friedman, the
Company’s then independent registered public accounting firm, that effective September 1, 2022, Friedman combined with Marcum Asia
and continued to operate as an independent registered public accounting firm. Friedman continued to serve as the Company’s independent
registered public accounting firm through February 1, 2023. On February 1, 2023, the audit committee approved the engagement of Marcum
Asia to serve as the independent registered public accounting firm of the Company.
Interests
of Named Experts and Counsel
No expert or counsel named in this prospectus
as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered
or upon other legal matters in connection with the registration or offering of the Class A Shares was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the Registrant. Nor
was any such person connected with the Registrant as a promoter, managing or principal underwriter, voting trustee, director, officer,
or employee.
Indemnification
For Securities Act Liabilities
Insofar as indemnification for liabilities arising
under the Securities Act, may be permitted to our directors, officers or persons controlling us, we have been advised that it is the
SEC’s opinion that such indemnification is against public policy as expressed in such act and is, therefore, unenforceable.
Information
Incorporated By Reference
The SEC allows us to “incorporate by reference”
into this prospectus the information we file with the SEC. This means that we can disclose important information to you by referring
you to those documents. Any statement contained in a document incorporated by reference in this prospectus shall be deemed to be modified
or superseded for purposes of this prospectus to the extent that a statement contained herein, or in any subsequently filed document,
which also is incorporated by reference herein, modifies or supersedes such earlier statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
We hereby incorporate by reference into this
prospectus the following documents that we have filed with the SEC under the Exchange Act:
| (1) |
|
the Company’s Annual
Report on Form 20-F for the fiscal year ended June 30, 2024, filed with the SEC on October 30, 2024; |
| |
|
|
| (2) |
|
the Company’s
Current Reports on Form 6-K, filed with the SEC on November 27,
2020, June 16,
2021, February 8,
2023, March 20,
2023, March 24,
2023, April 4,
2023; April 28, 2023,
June 2, 2023, August 25,
2023, October 27, 2023,
December 15, 2023, February 5,
2024, February 13, 2024,
April 2, 2024, April 25,
2024, April 29, 2024,
May 23, 2024, June 28,
2024, and October 9, 2024; and |
| |
|
|
| (3) |
|
the
description of our Ordinary Shares contained in our registration statement on Form 8-A/A filed on June 14, 2021 and
as it may be further amended from time to time. |
All documents that we file with the SEC pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (and in the case of a Current Report on Form 6-K, so long as they
state that they are incorporated by reference into this prospectus, and other than Current Reports on Form 6-K, or portions
thereof, furnished under Form 6-K) (i) after the initial filing date of the registration statement of which this prospectus
forms a part and prior to the effectiveness of such registration statement and (ii) after the date of this prospectus and prior
to the termination of the offering shall be deemed to be incorporated by reference in this prospectus from the date of filing of the
documents, unless we specifically provide otherwise. Information that we file with the SEC will automatically update and may replace
information previously filed with the SEC. To the extent that any information contained in any Current Report on Form 6-K or any
exhibit thereto, was or is furnished to, rather than filed with the SEC, such information or exhibit is specifically not incorporated
by reference.
You may obtain a copy of these filings, without
charge, by writing or calling us at:
Recon Technology, Ltd
Room
601, No.1 Shui’an South Street
Chaoyang District, Beijing, 100107
People’s Republic of China
+86 (10) 8494-5799
Attn: Investor Relations
You should rely only on the information incorporated
by reference or provided in this prospectus or any prospectus supplement. We have not authorized anyone else to provide you with different
information. You should not assume that the information in this prospectus or any prospectus supplement is accurate as of any date other
than the date on the front page of those documents.
Where
You Can Find Additional Information
We will file with the SEC a registration statement
on Form F-1 under the Securities Act with respect to the Class A Shares offered hereby. This prospectus, which constitutes
a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits
filed therewith. For further information about us and the Class A Shares offered hereby, reference is made to the registration statement
and the exhibits filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document
that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance we refer you to the copy
of such contract or other document filed as an exhibit to the registration statement. We currently do not file periodic reports with
the SEC. Upon closing of our initial public offering, we will be required to file periodic reports (including an annual report on Form 20-F,
which we will be required to file within 120 days from the end of each fiscal year), and other information with the SEC pursuant to the
Exchange Act. A copy of the registration statement and the exhibits filed therewith may be inspected without charge at the public reference
room maintained by the SEC, located at 100 F Street, NE, Washington, DC 20549, and copies of all or any part of the registration statement
may be obtained from that office. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The
SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that
file electronically with the SEC. The address of the website is www.sec.gov.
RECON TECHNOLOGY, LTD
PROSPECTUS
_______, 2025
Placement Agent
AC Sunshine Securities LLC
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 6. Indemnification of Directors and Officers
Cayman Islands law does
not limit the extent to which a company’s Articles of Association may provide for indemnification of officers and directors, except
to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification
against civil fraud or the consequences of committing a crime. Under the Fourth Amended and Restated Memorandum and Articles of Association
of the Registrant, the Registrant may indemnify its directors, officers, and their heirs, executors, administrators and personal representatives
against all actions, proceedings costs, charges, losses, damages and expenses which they incur or sustain by reason of any act done or
omitted in the course of their duty. To be entitled to indemnification, these persons must have acted honestly and in good faith with
a view to the best interest of the Registrant, without fraud, willful neglect or default and, in the case of criminal proceedings, they
must have had no reasonable cause to believe their conduct was unlawful.
Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
Item 7. Recent Sales of Unregistered Securities
Set forth below are the sales of all unregistered
securities of ours sold by us within the past three years (i.e., since June 14, 2021, up to the date of this registration statement)
which were not registered under the Securities Act. We believe that each of such issuances was exempt from registration under the Securities
Act in reliance on Section 4(a)(2) of the Securities Act, Rule 701 and/or Regulation S under the Securities Act.
On June 14, 2021, the Company and certain
institutional investors (the “Purchasers”) entered into that certain securities purchase agreement (the “Purchase Agreement”),
pursuant to which the Company agreed to sell to such Purchasers an aggregate of 6,014,102 Class A ordinary shares, par
value $0.0925 per share and 2,800,000 pre-funded warrants (the “Pre-Funded Warrants”) to purchase Class A
Shares in a registered direct offering, and warrants to purchase up to 8,814,102 Class A Shares in a concurrent private
placement, for gross proceeds of approximately $55.0 million before deducting the placement agent’s fees and other offering
expenses in an aggregate amount of $4.7 million.
On March 15, 2023, the Company and certain
institutional investors (the “Purchasers”) entered into that certain securities purchase agreement (the “Purchase Agreement”),
pursuant to which the Company agreed to sell to such Purchasers an aggregate of 8,827,500 Class A ordinary shares, par
value $0.0925 per share and 1,175,000 pre-funded warrants (the “Pre-Funded Warrants”) to purchase Class A
Shares in a registered direct offering, and warrants to purchase up to 10,002,500 Class A Shares in a concurrent private placement,
for gross proceeds of approximately $8.0 million before deducting the placement agent’s fees and other estimated offering
expenses.
On December 14,
2023, Company entered into a Warrant Purchase Agreement with certain accredited investors (the “Sellers”) pursuant to which
the Company agreed to buy back an aggregate of 17,953,269 warrants (the “Warrants”) from the Sellers, and the Sellers agreed
to sell the Warrants back to the Company. These Warrants were sold to these Sellers in two previous transactions that closed on June 16,
2021, and March 14, 2023. The purchase price for each Warrant is $0.25, and the terms of each Warrant Purchase Agreement are substantially
identical.
The privately placed
securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of
the Securities Act and Rule 506 of Regulation D promulgated thereunder since, among other things, the transactions did not involve
a public offering and the securities were acquired for investment purposes only and not with a view to or for sale in connection with
any distribution thereof.
On January 31, 2024, Company entered into
a securities purchase agreement (the “Securities Purchase Agreement”), pursuant to which the Company agreed to sell securities
to various purchasers (the “Purchasers”) in a private placement transaction (the “Private Placement”). Pursuant
to the Securities Purchase Agreement, the Company agreed to transfer, assign, set over and deliver to the Purchasers and the Purchasers
agree, severally and not jointly, to acquire from the Company in the aggregate 100,000,000 of the Company’s Class A ordinary
shares (the “Shares”) at USD$0.11 per share for USD$11,000,000.
The Shares are being sold in transactions exempt
from registration under the Securities Act of 1933, as amended (the “Securities Act”). Each Purchaser understands that the
Shares have not been registered under the Securities Act. Such Purchaser will not sell or otherwise dispose of the Shares without registration
under the Securities Act, and under applicable state securities or “Blue Sky” laws, or pursuant to an exemption therefrom.
No placement agent was involved in the Private Placement.
Item 8. Exhibits
| Exhibit No. |
|
Description |
| 1.1.1 |
|
Second
Amended and Restated Articles of Association of the Registrant |
| 1.1.2 |
|
Second Amended and Restated Memorandum of Association of the Registrant |
| 1.1.3 |
|
Third
Amended and Restated Articles of Association of the Registrant |
| 1.1.4 |
|
Third Amended and Restated Memorandum of Association of the Registrant |
| 1.1.5 |
|
Fourth
Amended and Restated Articles of Association of the Registrant |
| 1.1.6 |
|
Fourth Amended and Restated Memorandum of Association of the Registrant |
| 1.2 |
|
Specimen
Certificate |
| 2.1 |
|
Form of Placement Agent Agreement* |
| 2.2 |
|
Form of Common Warrant* |
| 4.1 |
|
2024
Equity Incentive Plan |
| 4.2 |
|
Translation of Amended and Restated Exclusive Equity Interest Purchase Agreement dated April 1, 2019 among Recon Hengda Technology (Beijing) Co., Ltd., Beijing BHD Petroleum Technology Co., Ltd. and Fan Zhang, Shenping Yin, Donglin Li, Zhiqiang Feng and Guangqiang Chen (previously filed) |
| 4.3 |
|
Translation of Amended and Restated Equity Interest Pledge Agreement dated April 1, 2019 between Recon Hengda Technology (Beijing) Co., Ltd. and Fan Zhang, Shenping Yin, Donglin Li, Zhiqiang Feng and Guangqiang Chen about Beijing BHD Petroleum Technology Co., Ltd. (previously filed) |
| 4.4 |
|
Translation of Exclusive Technical Consulting Service Agreement dated April 1, 2019 between Recon Hengda Technology (Beijing) Co., Ltd. and Nanjing Recon Technology Co., Ltd. (previously filed) |
| 4.5 |
|
Translation of Amended and Restated Exclusive Equity Interest Purchase Agreement dated April 1, 2019 among Recon Hengda Technology (Beijing) Co., Ltd., Nanjing Recon Technology Co., Ltd. and Shenping Yin, Guangqiang Chen and Degui Zhai (previously filed) |
| 4.6 |
|
Translation of Amended and Restated Equity Interest Pledge Agreement dated April 1, 2019 between Recon Hengda Technology (Beijing) Co., Ltd. and Shenping Yin, Guangqiang Chen and Degui Zhai about Nanjing Recon Technology Co., Ltd. (previously filed) |
| 4.7 |
|
Translation of Amended and Restated Exclusive Technical Consulting and Service Agreement dated April 1, 2019 between Recon Hengda Technology (Beijing) Co., Ltd. and Beijing BHD Petroleum Technology Co., Ltd. (previously filed) |
| 4.8 |
|
Translation of Power of Attorney for rights of Li Donglin in Beijing Baihengda Petroleum Technology (previously filed) |
| 4.9 |
|
Translation of Amended and Restated Power of Attorney for rights of Chen Guangqiang in Beijing Baihengda Petroleum Technology (previously filed) |
| 4.10 |
|
Translation of Power of Attorney for rights of Zhang Fan in Beijing Baihengda Petroleum Technology (previously filed) |
| 4.11 |
|
Translation of Power of Attorney for rights of Feng Zhiqiang in Beijing Baihengda Petroleum Technology (previously filed) |
| 4.12 |
|
Translation of Amended and Restated Power of Attorney for rights of Yin Shenping in Beijing Baihengda Petroleum Technology |
| 4.13 |
|
2021 Equity Incentive Plan |
| 4.14 |
|
2015 Equity Incentive Plan |
| 5.1 |
|
Opinion
of Campbells LLP* |
| 8.1 |
|
List of subsidiaries of the Company |
| 11.1 |
|
Code
of Ethics of the Company |
| 16.1 |
|
Letter
of Friedman LLP to the U.S. Securities and Exchange Commission dated February 8, 2023 |
| 16.2 |
|
Letter of Marcum Asia CPAs LLP to the U.S. Securities and Exchange Commission dated August 25, 2023 |
| 23.1 |
|
Consent
of Enrome LLP* |
| 23.2 |
|
Consent
of Campbells LLP (included in Exhibit 5.1)* |
| 23.3 |
|
Consent
of Jingtian & Gongcheng* |
| 23.4 |
|
Consent of Friedman LLP* |
| 24.1 |
|
Power
of Attorney |
| 107 |
|
Filing
Fee Table* |
* Filed herein.
Item 9. Undertakings
| |
(a) |
The undersigned
registrant hereby undertakes: |
| |
(1) |
To file, during
any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| |
(i) |
To include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
| |
(ii) |
To reflect
in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth
in the “Calculation of Registration Fee” table in the effective registration statement. |
| |
(iii) |
To include
any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material
change to such information in the registration statement. |
provided,
however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the information required
to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Securities and
Exchange Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b).
| |
(2) |
That, for the
purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof. |
| |
(3) |
To remove from
registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination
of the offering. |
| |
(4) |
That, for the
purpose of determining liability under the Securities Act of 1933 to any purchaser: |
| |
(i) |
Each prospectus
filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date
the filed prospectus was deemed part of and included in the registration statement; and |
| |
(ii) |
Each prospectus
required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information
required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration
statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract
of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement
made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective
date. |
| |
(5) |
That, for the
purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution
of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant
to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| |
(i) |
Any preliminary
prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
| |
(ii) |
Any free writing
prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned
registrant; |
| |
(iii) |
The portion
of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or
its securities provided by or on behalf of the undersigned registrant; and |
| |
(iv) |
Any other communication
that is an offer in the offering made by the undersigned registrant to the purchaser. |
| (b) |
That, for purposes
of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (c) |
Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue. |
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for
filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on March 17, 2025.
| |
RECON TECHNOLOGY, LTD |
| |
|
|
| |
By: |
/s/ Shenping
Yin |
| |
Name: |
Shenping Yin |
| |
Title: |
Chief Executive Officer |
| |
|
(Principal Executive Officer) |
| |
|
|
| |
By: |
/s/ Jia
Liu |
| |
Name: |
Jia Liu |
| |
Title: |
Chief Financial Officer |
| |
|
(Principal Accounting and
Financial Officer) |
| SIGNATURE |
|
TITLE |
|
DATE |
| |
|
|
|
|
| /s/ Shenping Yin |
|
Chief Executive Officer and Director |
|
March 17, 2025 |
| Shenping Yin |
|
(Principal Executive Officer) |
|
|
| |
|
|
|
|
| /s/ Jia Liu |
|
Chief Financial Officer and Director |
|
March 17, 2025 |
| Jia Liu |
|
(Principal Accounting and Financial Officer) |
|
|
| |
|
|
|
|
| /s/ Huan Liu |
|
Authorized Representative in the United States |
|
March 17, 2025 |
| Huan Liu |
|
|
|
|
| |
|
|
|
|
| /s/ * |
|
Chief Technology Officer and Director (Chairman) |
|
March 17, 2025 |
| Guangqiang Chen |
|
|
|
|
| |
|
|
|
|
| /s/ * |
|
Director |
|
March 17, 2025 |
| Shudong Zhao |
|
|
|
|
| |
|
|
|
|
| /s/ * |
|
Director |
|
March 17, 2025 |
| Jijun Hu |
|
|
|
|
| |
|
|
|
|
| /s/ * |
|
Director |
|
March 17, 2025 |
| Nelson N.S. Wong |
|
|
|
|
| |
|
|
|
|
| /s/ * |
|
Director |
|
March 17, 2025 |
| Yonggang Duan |
|
|
|
|
* By Shenping Yin, Attorney-in-Fact
Exhibit 2.1
[ ], 2025
Recon Technology, Ltd
Room 601, No.1 Shui’an South Street
Chaoyang District, Beijing, 100012
People’s Republic of China
Attention: Mr. Yin Shenping, Chief Executive Officer
Dear Mr. Yin:
This letter (the “Agreement”)
constitutes the agreement between AC Sunshine Securities LLC (“ACSS” or the “Placement Agent”) and
Recon Technology, Ltd., a Cayman Islands exempt company with limited liability (the “Company”), pursuant to which the
Placement Agent shall serve as the exclusive placement agent for the Company, on a “reasonable best efforts” basis, in connection
with the proposed placement (the “Placement”) of [ ] of the Company’s Class A ordinary shares, par value $0.0001
per share (“Class A Ordinary Shares;” such Class A Ordinary Shares, the “Shares”), and [ ] warrants
to purchase up to [ ] Class A Ordinary Shares (the “Common Warrants”). The Shares and the Common Warrants are herein
referred to collectively as the “Securities.” The terms of the Placement of the Securities shall be mutually
agreed upon by the Company and the purchasers (each, a “Purchaser” and collectively, the “Purchasers”)
and nothing herein constitutes that the Placement Agent would have the power or authority to bind the Company or any Purchaser or an obligation
for the Company to issue any Securities or complete the Placement. This Agreement and the documents executed and delivered by the Company
and the Purchasers in connection with the Placement, including but not limited to the Purchase Agreement (as defined below), shall be
collectively referred to herein as the “Transaction Documents.” The date of the closing of the Placement shall be referred
to herein as the “Closing Date.” The Company expressly acknowledges and agrees that the Placement Agent’s obligations
hereunder are on a reasonable best-efforts basis only and that the execution of this Agreement does not constitute a commitment by the
Placement Agent to purchase the Securities and does not ensure the successful placement of the Securities or any portion thereof or the
success of the Placement Agent with respect to securing any other financing on behalf of the Company. Following the prior written consent
of the Company, the Placement Agent may retain other brokers or dealers to act as sub-agents or selected dealers on its behalf in connection
with the Placement. The sale of the Securities to any Purchaser will be evidenced by a securities purchase agreement (the “Purchase
Agreement”) between the Company and such Purchaser in a form mutually agreed upon by the Company, the Purchasers and the Placement
Agent. Capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Purchase Agreement. Prior
to the signing of any Purchase Agreement, executive officers of the Company will be available upon reasonable notice and during normal
business hours to answer inquiries from prospective Purchasers.
SECTION 1. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY; COVENANTS OF THE COMPANY.
A. Representations
of the Company. Each of the representations and warranties (together with any related disclosure schedules thereto) and covenants
made by the Company to the Purchasers in the Purchase Agreement in connection with the Placement is hereby incorporated herein by reference
into this Agreement (as though fully restated herein) and is, as of the date of this Agreement and as of the Closing Date, hereby made
to, and in favor of, the Placement Agent. In addition to the foregoing, the Company represents and warrants that:
1. The Company has filed
with the Securities and Exchange Commission (the “Commission”) a Registration Statement on Form F-1, as amended (File
No. 333-282048) under the Securities Act, which was declared effective on __, 2025 (the “Registration Statement”) for
the registration of the Securities under the Securities Act. Following the determination of pricing among the Company and the prospective
investors introduced to the Company by Placement Agent, the Company will file with the Commission pursuant to Rules 430A and 424(b) under
the Securities Act, and the rules and regulations (the “Rules and Regulations”) of the Commission promulgated thereunder,
a final prospectus relating to the placement of the Securities, and the plan of distribution thereof and will advise the Placement Agent
of all further information (financial and other) with respect to the Company required to be set forth therein. Such prospectus in the
form in which it appears in the Registration Statement at the time of effectiveness, is hereinafter called the “Preliminary Prospectus”
and the final prospectus, in the form in which it will be filed with the Commission pursuant to Rules 430A and/or 424(b) (including the
Preliminary Prospectus as it may be amended or supplemented) is hereinafter called the “Final Prospectus.” Any reference
in this Agreement to the Registration Statement, the Preliminary Prospectus or the Final Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein (the “Incorporated Documents”), if any, which were or are filed under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), at any given time, as the case may be; and any
reference in this Agreement to the terms “amend,” “amendment” or “supplement” with respect to the
Registration Statement, the Preliminary Prospectus or the Final Prospectus shall be deemed to refer to and include the filing of any document
under the Exchange Act after the date of this Agreement, or the date of the Preliminary Prospectus or the Final Prospectus, as the case
may be, deemed to be incorporated therein by reference. All references in this Agreement to financial statements and schedules and other
information which is “contained,” “included,” “described,” “referenced,” “set forth”
or “stated” in the Registration Statement, the Preliminary Prospectus or the Final Prospectus (and all other references of
like import) shall be deemed to mean and include all such financial statements and schedules and other information, if any, which is or
is deemed to be incorporated by reference in the Registration Statement, the Preliminary Prospectus or the Final Prospectus, as the case
may be. As used in this paragraph and elsewhere in this Agreement, “Time of Sale Disclosure Package” means the Preliminary
Prospectus, the Transaction Documents, the final terms of the Placement provided to the investors in writing, and any issuer free writing
prospectus as defined in Rule 433 of the Securities Act (each, an “Issuer Free Writing Prospectus”), if any, that the
parties hereto shall hereafter expressly agree in writing to treat as part of the Time of Sale Disclosure Package. The term “any
Prospectus” shall mean, as the context requires, the Preliminary Prospectus, the Final Prospectus and any supplement thereof.
The Company has not received any notice that the Commission has issued or intends to issue a stop order suspending the effectiveness of
the Registration Statement or the use of the Preliminary Prospectus or the Final Prospectus or intends to commence a proceeding for any
such purpose.
2. The Registration Statement
(and any further documents to be filed with the Commission) contains all exhibits and schedules as required by the Securities Act. Each
of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects
with the Securities Act and the Exchange Act and the applicable Rules and Regulations and did not and, as amended or supplemented, if
applicable, will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Registration Statement, the Time of Sale Disclosure Package and the Final
Prospectus, each as of its respective date, comply in all material respects with the Securities Act and the Exchange Act and the applicable
Rules and Regulations. Each of the Registration Statement, the Time of Sale Disclosure Package and the Final Prospectus, as amended or
supplemented, did not and will not contain as of the date thereof any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The
Incorporated Documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange
Act and the applicable Rules and Regulations, and none of such documents, when they were filed with the Commission, contained any untrue
statement of a material fact or omitted to state a material fact necessary to make the statements therein (with respect to Incorporated
Documents incorporated by reference in the Registration Statement or the Final Prospectus ), in light of the circumstances under which
they were made not misleading; and any further documents so filed and incorporated by reference in the Registration Statement, the Time
of Sale Disclosure Package or the Final Prospectus, when such documents are filed with the Commission, will conform in all material respects
to the requirements of the Exchange Act and the applicable Rules and Regulations, as applicable, and will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which
they were made, not misleading. No post-effective amendment to the Registration Statement reflecting any facts or events arising after
the date thereof which represent, individually or in the aggregate, a fundamental change in the information set forth therein is required
to be filed with the Commission. There are no documents required to be filed with the Commission in connection with the transaction contemplated
hereby that (x) have not been filed as required pursuant to the Securities Act or (y) will not be filed within the requisite time period.
There are no contracts or other documents required to be described in the Registration Statement, the Time of Sale Disclosure Package
or the Final Prospectus, or to be filed as exhibits or schedules to the Registration Statement, which (x) have not been described or filed
as required or (y) will not be filed within the requisite time period.
3. The Company is eligible
to use Free Writing Prospectuses in connection with the Placement pursuant to Rules 164 and 433 under the Securities Act. Any Free Writing
Prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the
Commission in accordance with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder.
Each Free Writing Prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act or that
was prepared by or behalf of or used by the Company complies or will comply in all material respects with the requirements of the Securities
Act and the applicable rules and regulations of the Commission thereunder. The Company will not, without the prior consent of the Placement
Agent, prepare, use or refer to, any Free Writing Prospectus.
4. There are no affiliations
with any FINRA member firm among the Company’s officers, directors or, to the knowledge of the Company, any ten percent (10.0%)
or greater stockholder of the Company, except as set forth in the Registration Statement, the Time of Sale Disclosure Package and the
Final Prospectus.
B. Covenants of the
Company. The Company has delivered or made available, or will as promptly as practicable deliver or make available, to the Placement
Agent complete conformed copies of the Registration Statement and of each consent and certificate of experts, as applicable, filed as
a part thereof, and conformed copies of the Registration Statement (without exhibits), the Time of Sale Disclosure Package and the Final
Prospectus, as amended or supplemented, in such quantities and at such places as the Placement Agent reasonably requests. Neither the
Company nor any of its directors and officers has distributed and none of them will distribute, prior to the Closing Date, any offering
material in connection with the offering and sale of the Securities pursuant to the Placement other than the Registration Statement, the
Time of Sale Disclosure Package, the Final Prospectus, copies of the documents incorporated by reference therein and any other materials
permitted by the Securities Act.
SECTION 2. REPRESENTATIONS
OF THE PLACEMENT AGENT. The Placement Agent represents and warrants that it (i) is a member in good standing of FINRA, (ii) is registered
as a broker/dealer under the Exchange Act, (iii) is licensed as a broker/dealer under the laws of the States applicable to the offers
and sales of the Securities by the Placement Agent, (iv) is and will be a corporate entity validly existing under the laws of its place
of incorporation, and (v) has full power and authority to enter into and perform its obligations under this Agreement. The Placement Agent
will immediately notify the Company in writing of any change in its status as such. The Placement Agent covenants that it will use its
reasonable best efforts to conduct the Placement hereunder in compliance with the provisions of this Agreement and the requirements of
applicable law.
SECTION 3. COMPENSATION.
In consideration of the services to be provided for hereunder, the Company shall pay to the Placement Agent or its designees their pro
rata portion (based on the Securities placed) of the following compensation with respect to the Securities which they are placing:
A. A cash fee (the “Cash
Fee”) equal to an aggregate of five percent (5.0%) of the aggregate gross proceeds raised in the Placement). The Cash Fee shall
be paid at the Closing of the Placement.
B. Subject to compliance
with FINRA Rule 5110(g)(5), the Company shall be responsible for and pay all expenses relating to the Placement, including, without limitation,
all filing fees and communication expenses relating to the registration of the Securities to be sold in the Placement with the Commission
and the filing of the offering materials with FINRA; all fees, expenses and disbursements relating to the registration or qualification
of such Securities under the “blue sky” securities laws of such states and other jurisdictions as ACSS may reasonably designate
(including, without limitation, all filing and registration fees, and the fees and disbursements of ACSS’s counsel at the closing
of the Placement); all fees and expenses associated with the roadshow; the costs of all mailing and printing of the underwriting documents
(including the Placement Agent Agreement, any “blue sky” surveys and, if appropriate, any agreement among placement agents,
selected dealers’ agreement, placement agents’ questionnaire and power of attorney), Registration Statements, Prospectuses
and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as ACSS may reasonably deem necessary;
the costs of preparing, printing, and delivering certificates representing such Securities; fees and expenses of the transfer agent for
such Securities; stock transfer taxes, if any, payable upon the transfer of securities from the Company to ACSS, if applicable; the fees
and expenses of the Company’s accountants and the fees and expenses of ACSS and the Company’s legal counsel and other agents
and representatives. Upon ACSS’s request, the Company shall provide funds to pay all such fees, expenses and disbursements. The
Company has agreed to pay an expense advance (the “Advance”) of $[ ] to ACSS for FINRA fee, legal counselor retainers,
and due diligence fee, which is payable upon the execution of the engagement letter, dated September 5, 2024 (the “Engagement
Letter”), between the Company and the Placement Agent. The Advance shall be applied towards out-of-pocket accountable expense
set forth herein and any portion of the Advance shall be returned to the Company to the extent not actually incurred. ACSS may deduct
from the net proceeds of the Placement payable to the Company on the date of the Closing, if any, the expenses set forth herein to be
paid by the Company to ACSS. Additionally, upon the receipt of invoices, the Company agrees to reimburse ACSS for, or otherwise pay and
bear, the expenses and fees to be paid and borne by the Company as provided herein and to reimburse ACSS for the full amount of its accountable
expenses incurred to date (which shall include, but not be limited to, all fees and disbursements of ACSS’s counsel, mailing, printing
and reproduction expenses, and any expenses incurred by ACSS in conducting its due diligence), minus any amounts previously paid to ACSS
in reimbursement for such expenses. The Company’s payment and reimbursement obligations under this Section 3(B) shall apply regardless
of whether the Agreement is terminated. Notwithstanding the foregoing, the fees payable under this Section 3(B) shall not exceed $170,000.
C. The Placement Agent
reserves the right to reduce any item of its compensation or adjust the terms thereof as specified herein in the event that a determination
shall be made by FINRA to the effect that the Placement Agent’s aggregate compensation is in excess of FINRA Rules or that the terms
thereof require adjustment.
D. All payments made
or deemed to be made by the Company to the Placement Agent, its affiliates, stockholders, directors, officers, employees, members and
controlling persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each, a “Payee”),
if any, will be made without withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature (other than taxes on net income or similar taxes) imposed or levied by or on behalf of the United States or
any political subdivision or any taxing authority thereof or therein unless the Company is or becomes required by law to withhold or deduct
such taxes, duties, assessments or other governmental charges. In such event, the Company will pay such additional amounts as will result,
after such withholding or deduction, in the receipt by the Payee of the amounts that would otherwise have been receivable in respect thereof.
For the avoidance of doubt, all sums payable, paid or deemed payable under this Agreement shall be considered exclusive of value added
tax, sales tax or other similar taxes which shall be borne by, paid, collected and remitted by the Company in accordance with applicable
law.
SECTION 4. INDEMNIFICATION.
The Company agrees to the indemnification and other agreements set forth in the Indemnification Provisions (the “Indemnification”)
attached hereto as Addendum A, the provisions of which are incorporated herein by reference and shall survive the termination
or expiration of this Agreement.
SECTION 5. ENGAGEMENT
TERM. The Placement Agent’s engagement hereunder shall be until the earlier of (i) the final closing date of the Placement and
(ii) [ ], 2025 (such date, the “Termination Date” and the period of time during which this Agreement remains in effect
is referred to herein as the “Term”). This Agreement may not be terminated by the Company prior to the completion of
the Term other than for “Cause”. For purposes of this Agreement, “Cause,” shall mean, as determined by
a court of competent jurisdiction, shall mean fraud, willful misconduct, gross negligence, or a material breach of this Agreement by ACSS
as specified in FINRA Rule 5110(g)(5)(B)(i). In the event that the Company believes that the Placement Agent has engaged any conduct constituting
Cause, the Company must first notify the Placement Agent in writing of the facts and circumstances supporting such an assertion(s) and
allow the Placement Agent ten (10) days to cure such alleged conduct. Notwithstanding anything to the contrary contained herein, the provisions
concerning the Company’s obligation to pay any fees actually earned pursuant to Section 3 hereof and the provisions concerning confidentiality,
indemnification and contribution contained herein and the Company’s obligations contained in the Indemnification Provisions will
survive any expiration or termination of this Agreement. If this Agreement is terminated prior to the completion of the Placement for
any reason, all fees and expense reimbursement due to the Placement Agent shall be paid by the Company to the Placement Agent on or before
the Termination Date (in the event such fees are earned or owed as of the Termination Date). The Placement Agent agrees not to use any
confidential information concerning the Company provided to the Placement Agent by the Company for any purposes other than those contemplated
under this Agreement.
SECTION 6. PLACEMENT
AGENT INFORMATION. The Company agrees that any information or advice rendered by the Placement Agent in connection with this engagement
is for the confidential use of the Company only in their evaluation of the Placement and, except as otherwise required by law, the Company
will not disclose or otherwise refer to the advice or information in any manner without the Placement Agent’s prior written consent.
SECTION 7. NO
FIDUCIARY RELATIONSHIP. This Agreement does not create and shall not be construed as creating rights enforceable by any person or
entity not a party hereto, except those entitled hereto by virtue of the Indemnification Provisions hereof. The Company acknowledges and
agrees that the Placement Agent is not and shall not be construed as a fiduciary of the Company and shall have no duties or liabilities
to the equity holders or the creditors of the Company or any other person by virtue of this Agreement or the retention of the Placement
Agent hereunder, all of which are hereby expressly waived.
SECTION 8. CLOSING.
The obligations of the Placement Agent, and the closing of the sale of the Securities hereunder are subject to the accuracy, when made
and on the Closing Date, of the representations and warranties on the part of the Company contained herein and in the Purchase Agreement,
to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the
Company of their obligations hereunder, and to each of the following additional terms and conditions, except as otherwise disclosed to
the Placement Agent by the Company and acknowledged and waived by the Placement Agent:
A. No stop order suspending
the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or
threatened by the Commission, and any request for additional information on the part of the Commission (to be included in the Registration
Statement, the Time of Sale Disclosure Package, the Final Prospectus or otherwise) shall have been complied with to the reasonable satisfaction
of the Placement Agent. Any filings required to be made by the Company in connection with the Placement shall have been timely filed with
the Commission.
B. The Placement Agent
shall not have discovered and disclosed to the Company on or prior to the Closing Date that the Registration Statement, the Time of Sale
Disclosure Package, the Final Prospectus or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion
of counsel for the Placement Agent, is material or omits to state any fact which, in the opinion of such counsel, is material and is required
to be stated therein or is necessary to make the statements therein not misleading.
C. Neither the Company
nor any of its affiliates shall have, either prior to the initial filing of the Registration Statement or after the effective date of
the Registration Statement, made any offer or sale of any securities which are required to be “integrated” pursuant to the
Securities Act or the Rules and Regulations thereunder with the offer and sale of the Securities pursuant to the Registration Statement.
D. All corporate proceedings
and other legal matters incident to the authorization, form, execution, delivery and validity of each of this Agreement, the Securities,
the Registration Statement, the Time of Sale Disclosure Package and the Final Prospectus and all other legal matters relating to this
Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Placement
Agent, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them
to pass upon such matters.
E. The Placement Agent
shall have received from each of (i) Kaufman & Canoles, P.C., the Company’s counsel as to the U.S. federal securities law and
New York law, (ii) Campbells LLP, the Company’s counsel as to Cayman Islands law, and (iii) Jingtian & Gongcheng, the Company’s
counsel as to People’s Republic of China law, such counsels’ written opinions, addressed to the Placement Agent and the Purchasers
and dated as of the Closing Date, in form and substance reasonably satisfactory to the Placement Agent.
F. On the date of this
Agreement and on the Closing Date, the Placement Agent shall have received “comfort” letters from Enrome LLP, independent
registered public accounting firm, as of each such date, addressed to the Placement Agent and in form and substance satisfactory in all
respects to the Placement Agent and Placement Agent’s U.S. securities law counsel.
G. On the date of this Agreement
and on the Closing Date, the Placement Agent shall have received a written certificate executed by the Chief Financial Officer of the
Company, dated as of such date, on behalf of the Company, with respect to certain financial data contained in the Registration Statement,
Time of Sale Disclosure Package and the Final Prospectus, providing “management comfort” with respect to such information,
in form and substance reasonably satisfactory to the Placement Agent.
H. On the date of this
Agreement and on the Closing Date, the Placement Agent shall have received a certificate of the Chief Executive Officer of the Company,
dated as of such date, on behalf of the Company that, the representations and warranties of the Company contained herein and in the Purchase
Agreement were and are accurate in all material respects, except for such changes as are contemplated by this Agreement and except as
to representations and warranties that were expressly limited to a state of facts existing at a time prior to the applicable Closing Date,
and that, as of the applicable date, the obligations to be performed by the Company hereunder on or prior thereto have been fully performed
in all material respects.
I. On the date of this
Agreement and on the Closing Date, the Placement Agent shall have received a certificate of the Secretary or a member of the management
of the Company designated by the Placement Agent, dated as of such date, on behalf of the Company, certifying to the organizational documents,
good standing in the state of incorporation of the Company and board resolutions relating to the Placement of the Securities.
J. The Company (i) shall
not have sustained since the date of the latest audited financial statements included or incorporated by reference in the Registration
Statement, the Time of Sale Disclosure Package and the Final Prospectus, any loss or interference with its business from fire, explosion,
flood, terrorist act or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth in or contemplated by the Registration Statement, the Time of Sale Disclosure Package and
the Final Prospectus , and (ii) since such date there shall not have been any change in the capital stock or long-term debt of the Company
or any change, or any development involving a prospective change, in or affecting the business, general affairs, management, financial
position, stockholders’ equity, results of operations or prospects of the Company, otherwise than as set forth in or contemplated
by the Registration Statement, the Time of Sale Disclosure Package and the Final Prospectus , the effect of which, in any such case described
in clause (i) or (ii), is, in the judgment of the Placement Agent, so material and adverse as to make it impracticable or inadvisable
to proceed with the sale or delivery of the Securities on the terms and in the manner contemplated by the Registration Statement, the
Time of Sale Disclosure Package and the Final Prospectus.
K. The Class A Ordinary
Securities are registered under the Exchange Act and, as of the Closing Date, the Securities shall be listed for trading on the Nasdaq
Capital Market (the “Trading Market”) or other applicable U.S. national exchange and reasonable evidence of such action,
if available, shall have been provided to the Placement Agent upon its request. The Company shall have taken no action designed to, or
likely to have the effect of terminating the registration of the Class A Ordinary Shares under the Exchange Act or delisting or suspending
from trading the Class A Ordinary Shares from the Trading Market or other applicable U.S. national exchange, nor has the Company received
any information suggesting that the Commission or the Trading Market or other U.S. applicable national exchange is contemplating terminating
such registration or listing. The Company shall use its best efforts to maintain the listing of the Class A Ordinary Shares on the
Nasdaq Stock Market LLC for a period of at least three years after the Closing.
L. No action shall have
been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which
would, as of the Closing Date, prevent the issuance or sale of the Securities or materially and adversely affect or potentially and adversely
affect the business or operations of the Company; and no injunction, restraining order or order of any other nature by any federal or
state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Securities
or materially and adversely affect or potentially and adversely affect the business or operations of the Company.
M. The Company shall
have prepared and filed with the Commission a Form 6-K with respect to the Placement, including as an exhibit thereto this Agreement.
N. The Company shall
have entered into a Purchase Agreement with each of the Purchasers and such agreements shall be in full force and effect and shall contain
representations, warranties and covenants of the Company as agreed between the Company and the Purchasers.
O. FINRA shall have raised
no objection to the fairness and reasonableness of the terms and arrangements of this Agreement. In addition, the Company shall, if requested
by the Placement Agent, make or authorize Placement Agent’s counsel to make on the Company’s behalf, any filing with the FINRA
Corporate Financing Department pursuant to FINRA Rule 5110 with respect to the Placement and pay all filing fees required in connection
therewith.
P. Prior to the Closing
Date, the Placement Agent shall have completed to its satisfaction, its due diligence investigation and analysis of: (i) the Company’s
arrangements with its officers, directors, employees, affiliates, customers and suppliers and (ii) the audited historical financial statements
of the Company as required by the Commission (including any relevant stub periods).
Q. Prior to the Closing
Date, the Company shall have furnished to the Placement Agent such further information, certificates and documents as the Placement Agent
may reasonably request.
If any of the conditions specified
in this Section 8 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written
statements or letters furnished to the Placement Agent or to Placement Agent’s counsel pursuant to this Section 8 shall not be reasonably
satisfactory in form and substance to the Placement Agent and to Placement Agent’s counsel, all obligations of the Placement Agent
hereunder may be cancelled by the Placement Agent at, or at any time prior to, the consummation of the Closing. Notice of such cancellation
shall be given to the Company in writing or orally. Any such oral notice shall be confirmed promptly thereafter in writing.
SECTION 9. GOVERNING
LAW. This Agreement will be governed by, and construed in accordance with, the internal laws of the State of New York without regard
to its conflict of laws provisions. This Agreement may not be assigned by either party without the prior written consent of the other
party. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted
assigns. Any right to trial by jury with respect to any dispute arising under this Agreement or any transaction or conduct in connection
herewith is waived. Any dispute arising under this Agreement may be brought into the courts of the State of New York or into the United
States District Court for the Southern District of New York and, by execution and delivery of this Agreement, the Company hereby accepts
for itself and in respect of its property, generally and unconditionally, the jurisdiction of aforesaid courts. Each party hereto hereby
irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by delivering
a copy thereof via overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law. If either party shall commence an action
or proceeding to enforce any provisions of a Transaction Document, then the prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorney’s fees and other costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.
SECTION 10. ENTIRE
AGREEMENT/MISC. This Agreement (including the attached Indemnification Provisions) embodies the entire agreement and understanding
between the parties hereto, and supersedes all prior agreements and understandings, relating to the subject matter hereof. If any provision
of this Agreement is determined to be invalid or unenforceable in any respect, such determination will not affect such provision in any
other respect or any other provision of this Agreement, which will remain in full force and effect. This Agreement may not be amended
or otherwise modified or waived except by an instrument in writing signed by both Placement Agent and the Company. The representations,
warranties, agreements and covenants contained herein shall survive the closing of the Placement and delivery of the Securities. This
Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that
both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or a .pdf format
file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or .pdf signature page were an original thereof.
SECTION 11. CONFIDENTIALITY.
The Placement Agent (i) will keep the Confidential Information (as such term is defined below) confidential and will not (except as required
by applicable law or stock exchange requirement, regulation or legal process (“Legal Requirement”)), without the Company’s
prior written consent, disclose to any person any Confidential Information, and (ii) will not use any Confidential Information other than
in connection with the Placement. The Placement Agent further agrees to disclose the Confidential Information only to its Representatives
(as such term is defined below) who need to know the Confidential Information for the purpose of the Placement, and who are informed by
the Placement Agent of the confidential nature of the Confidential Information. The term “Confidential Information”
shall mean, all confidential, proprietary and non-public information (whether written, oral or electronic communications) furnished by
the Company to a Placement Agent or its Representatives in connection with the Placement Agent’s evaluation of the Placement. The
term “Confidential Information” will not, however, include information which (i) is or becomes publicly available other
than as a result of a disclosure by a Placement Agent or its Representatives in violation of this Agreement, (ii) is or becomes available
to a Placement Agent or any of its Representatives on a non-confidential basis from a third-party, (iii) is known to a Placement Agent
or any of its Representatives prior to disclosure by the Company or any of its Representatives, or (iv) is or has been independently developed
by a Placement Agent and/or the Representatives without use of any Confidential Information furnished to it by the Company. The term “Representatives”
shall mean the Placement Agent’s directors, board committees, officers, employees, financial advisors, attorneys and accountants.
This provision shall be in full force until the earlier of (a) the date that the Confidential Information ceases to be confidential and
(b) two years from the date hereof. Notwithstanding any of the foregoing, in the event that the Placement Agent or any of its Representatives
are required by Legal Requirement to disclose any of the Confidential Information, the Placement Agent and its Representatives will furnish
only that portion of the Confidential Information which the Placement Agent or its Representative, as applicable, is required to disclose
by Legal Requirement as advised by counsel, and will use reasonable efforts to obtain reliable assurance that confidential treatment will
be accorded the Confidential Information so disclosed.
SECTION 12. NOTICES.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is sent to the email address
specified on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a business day, (b) the next business day
after the date of transmission, if such notice or communication is sent to the email address on the signature pages attached hereto on
a day that is not a business day or later than 5:30 p.m. (New York City time) on any business day, (c) the second business day following
the date of mailing, if sent by U.S. internationally recognized air courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages hereto.
SECTION 13. PRESS
ANNOUNCEMENTS. The Company agrees that the Placement Agent shall, from and after any Closing, have the right to reference the Placement
and the Placement Agent’s role in connection therewith in the Placement Agent’s marketing materials and on its website and
to place advertisements in financial and other newspapers and journals, in each case at its own expense.
[The remainder of this page has been intentionally
left blank.]
Please confirm that the foregoing
correctly sets forth our agreement by signing and returning to AC Sunshine the enclosed copy of this Agreement.
| |
Very truly yours, |
| |
|
| |
AC SUNSHINE SECURITIES LLC |
| |
By: |
|
| |
|
Name: Dr. Ying Cui |
| |
|
Title: President |
| |
Address for notice: |
| |
200 E. Robinson Street, STE 295 |
| |
Orlando, Florida 32801 |
| |
Attention: Dr. Ying Cui |
| |
Email: ycui@acsunshine.com |
| |
|
| |
With a copy to (which shall not constitute notice): |
| |
|
| |
VCL Law LLP |
| |
1945 Old Gallows Road, Suite 260 |
| |
Vienna, VA 22182 |
| |
Attention: |
Fang Liu, Esq. |
| |
E-mail: |
fliu@vcllegal.com |
| Accepted and agreed to as of the date first written above: |
| |
|
| RECON TECHNOLOGY, LTD |
|
| By: |
|
|
| |
Name: |
Yin Shenping |
|
| |
Title: |
Chief Executive Officer |
|
| Address for notice: |
| [ ] |
| [ ] |
| Attention: [ ] |
| Email: [ ] |
| With a copy to (which shall not constitute notice): |
| |
|
| Kaufman & Canoles, P.C. |
|
| Two James Center, 14th Floor |
|
|
1021 East Cary St.
Richmond, Virginia 23219 |
|
| Attention: [ ] |
|
| Email: [ ] |
|
[Signature Page to Placement Agency Agreement
Between
Recon Technology, Ltd and AC Sunshine Securities
LLC]
ADDENDUM A
INDEMNIFICATION PROVISIONS
Capitalized terms used in this
Addendum A shall have the meanings ascribed to such terms in the Agreement to which this Addendum A is attached.
In addition to and without
limiting any other right or remedy available to the Placement Agent and the Indemnified Parties (as hereinafter defined), the Company
agrees to indemnify and hold harmless the Placement Agent and its affiliates, and the respective officers, directors, employees, agents,
legal counsel, advisor and representatives of the Placement Agent, its affiliates and each other person, if any, controlling the Placement
Agent or any of its affiliates (the Placement Agent and each such other person being an “Indemnified Person”) from
and against any losses, claims, damages or liabilities related to, arising out of or in connection with Placement under the Agreement
the , and will reimburse each Indemnified Person for all expenses (including fees and expenses of counsel) as they are incurred in connection
with investigating, preparing, pursuing or defending any action, claim, suit, investigation or proceeding related to, arising out of or
in connection with the Engagement, whether or not pending or threatened and whether or not any Indemnified Person is a party. The Company
will not, however, be responsible for any losses, claims, damages or liabilities (or expenses relating thereto) that are judicially determined
in a judgment not subject to appeal to have resulted from the fraud, bad faith, gross negligence or intentional misconduct of any Indemnified
Person.
The Company will not, without
the Placement Agent’s prior written consent, settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate
any action, claim, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not any Indemnified Person
is a party thereto) unless such settlement, compromise, consent or termination includes a release of each Indemnified Person from any
liabilities arising out of such action, claim, suit or proceeding. No Indemnified Person seeking indemnification, reimbursement or contribution
under this agreement will, without the prior written consent of the Indemnitor, settle, compromise, consent to the entry of any judgment
in or otherwise seek to terminate any action, claim, suit, investigation or proceeding referred to in the preceding paragraph.
If the indemnification provided
for in the first paragraph of this Addendum A is judicially determined to be unavailable (other than in accordance with the second sentence
of the first paragraph hereof) to an Indemnified Person in respect of any losses, claims, damages or liabilities referred to herein, then,
in lieu of indemnifying such Indemnified Person hereunder, the Company shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities (and expense relating thereto): (i) in such proportion as is appropriate
to reflect the relative benefits to the applicable Indemnified Person, on the one hand, and the Indemnitor, on the other hand, of the
Engagement or (ii) if the allocation provided by clause (i) above is not available, in such proportion as is appropriate to reflect not
only the relative benefits referred to in such clause (i) but also the relative fault of each of the applicable Indemnified Person and
the Indemnitor, as well as any other relevant equitable considerations; provided, however, that in no event shall any Indemnified Person’s
aggregate contribution to the amount paid or payable exceed the aggregate amount of fees actually received by the Placement Agent under
the Agreement. Assuming that the Company has fully satisfied the amount of their obligations provided for herein to the Indemnified Persons,
and the Indemnified Persons shall have no further liabilities in connection therewith, then the Company may take control of any pending
action or litigation in order to reduce the expenses in connection therewith. For the purposes of this Addendum A, the relative benefits
to the Company and the applicable Indemnified Person of the Engagement shall be deemed to be in the same proportion as: (a) the total
net value paid or contemplated to be paid or received or contemplated to be received by the Company and its affiliates (including the
Company’s stockholders), as the case may be, in the transaction or transactions that are the subject of the Engagement, whether
or not any such transaction is consummated, bears to (b) the fees paid to the Placement Agent in connection with the Engagement.
Procedure. Upon obtaining
knowledge of any claim which may give rise to indemnification not involving a Third-Party Claim (as defined below), the Indemnified Person
shall, as promptly as practicable following the date the Indemnified Person has obtained such knowledge, give written notice (which may
be delivered by electronic mail transmission, with confirmation of receipt by the receiving party) of such claim for which indemnification
is sought (each, a “Claim”) to the Indemnitor, but no failure to give such notice shall relieve the Company of any liability
hereunder (except to the extent that the Company has suffered actual, irreversible and material economic prejudice thereby). The Indemnified
Person, at its cost, shall furnish to the Company in good faith and in reasonable detail such information as the Indemnified Person may
have with respect to such Claim.
Promptly after receipt by an
Indemnified Person of notice of the commencement of any action, suit or proceeding involving a Claim by a third party (each, a “Third-Party
Claim”) against it, such Indemnified Person will give written notice to the Company of the commencement of such Third-Party
Claim, and shall give the Company such information with respect thereto as the Company may reasonably request, but no failure to give
such notice shall relieve the Company of any liability hereunder (except to the extent the Company have suffered actual, irreversible
and material economic prejudice thereby). The Company shall have the right, but not the obligation, to assume the defense and control
the settlement of such Third-Party Claim, at their cost and expense (and not as a reduction in the amount of indemnification available
hereunder), using counsel selected by the Company and reasonably acceptable to the Indemnified Person. If the Company satisfies the requirements
of this Addendum A and desire to exercise our right to assume the defense and control the settlement of such Third-Party Claim, the Company
shall give written notice (the “Notice”) to the Indemnified Person within fourteen (14) calendar days of receipt of
notice from the Indemnified Person of the commencement of or assertion of any Third-Party Claim stating that the Company shall be responsible
for such Third-Party Claim. Notwithstanding the foregoing, the Indemnified Person shall have the right: (i) to assume the defense and
control the settlement of a Third-Party Claim and (ii) to employ separate counsel at the Indemnified Person’s reasonable expense
(provided that the Company shall not be required to reimburse the expenses and costs of more than one law firm) and control its own defense
of a Third-Party Claim if (x) the named parties to any such action (including any impleaded parties) include both the Indemnified Person
and the Indemnitor, and the Indemnified Person shall have been advised by counsel that there are one or more legal or equitable defenses
available to the Indemnified Person that are different from those available to the Indemnitor, (y) such Third-Party Claim involves equitable
or other non-monetary damages or in the reasonable judgment of the Indemnified Person, such settlement would have a continuing material
adverse effect on the Indemnified Person’s business (including any material impairment of its relationships with customers and suppliers)
or (z) or in the reasonable judgment of the Indemnified Person, the Company may not be able to satisfy fully such Third-Party Claim. In
addition, if the Company fails to give the Indemnified Person the Notice in accordance with the terms hereof, the Indemnified Person shall
have the right to assume control of the defense of and settle the Third-Party Claim and all costs incurred in connection therewith shall
constitute damages of the Indemnified Person. For the avoidance of doubt, the Company acknowledges that it will advance any retainer fees
required by legal counsel to an Indemnified Person simultaneously with the engagement by such Indemnified Person of such counsel, and
that such retainer shall be credited to fees incurred with the balance (if any) refundable to the Indemnitor.
If at any time after the Company
assumes the defense of a Third-Party Claim, any of the conditions set forth in the paragraph above are no longer satisfied, the Indemnified
Person shall have the same rights as set forth above as if the Company never assumed the defense of such claim.
Notwithstanding the foregoing,
the Company or the Indemnified Person, as the case may be, shall have the right to participate, at the Indemnitor’s or the Indemnified
Person’s own expense, in the defense of any Third-Party Claim that the other party is defending.
If the Company assumes the
defense of any Third-Party Claim in accordance with the terms hereof, the Company shall have the right, upon 30 calendar days’ prior
written notice to the Indemnified Person, to consent to the entry of judgment with respect to, or otherwise settle such Third-Party Claim;
provided, however, that with respect to such consent to the entry of judgment or settlement, the Indemnified Person will not have any
liability and will be fully indemnified with respect to all Third-Party Claims. Notwithstanding the foregoing, the Company shall not have
the right to consent to the entry of judgment with respect to, or otherwise settle a Third-Party Claim if: (i) the consent to judgment
or settlement of such Third-Party Claim involves equitable or other non-monetary damages against the Indemnified Person, or (ii) in the
reasonable judgment of the Indemnified Person, such settlement would have a continuing effect on the Indemnified Person’s business
(including any material impairment of its relationships with customers and suppliers), without the prior written consent of the Indemnified
Person. In addition, the Indemnified Person shall have the sole and exclusive right to settle any Third-Party Claim on such terms and
conditions as it deems reasonably appropriate, (x) if the Company fails to assume the defense in accordance with the terms hereof, or
(y) to the extent such Third-Party Claim involves only equitable or other non-monetary relief, and shall have the right to settle any
Third-Party Claim involving monetary damages with our consent, which consent shall not be unreasonably withheld.
The provisions of this Addendum
A shall apply to the Engagement and any modification thereof and shall remain in full force and effect regardless of any termination or
the completion of the Placement Agent’s services under the Agreement.
[The remainder of this page has been intentionally
left blank.]
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Very truly yours, |
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AC SUNSHINE SECURITIES LLC |
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By: |
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Name: |
Dr. Ying Cui |
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|
Title: |
President |
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Address for notice: |
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200 E. Robinson Street, STE 295 |
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Orlando, Florida 32801 |
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Attention: Dr. Ying Cui |
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Email: ycui@acsunshine.com |
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With a copy to (which shall not constitute notice): |
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VCL Law LLP |
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1945 Old Gallows Road, Suite 260 |
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Vienna, VA 22182 |
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Attention: Fang Liu, Esq. |
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E-mail: fliu@vcllegal.com |
Accepted and agreed to as of the date first written
above:
| Recon Technology, Ltd |
|
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|
| By: |
|
|
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Name: |
Yin Shenping |
|
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Title: |
Chief Executive Officer |
|
|
Address for notice: |
| [ ] |
| [ ] |
| Attention: [ ] |
| Email: [ ] |
With a copy to (which shall not constitute notice):
| Kaufman & Canoles, P.C. |
| Two James Center, 14th Floor |
|
1021 East Cary St.
Richmond, Virginia 23219 |
| Attention: [ ] |
| Email: [ ] |
[Signature Page to Indemnification Provisions
Pursuant to Placement Agency Agreement]
between Recon Technology, Ltd and AC Sunshine Securities, LLC]
Exhibit 2.2
ORDINARY SHARES PURCHASE WARRANT
RECON
TECHNOLOGY, LTD
| Warrant Shares: ______________ |
Issue Date: _____________, 2025 |
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|
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Initial Exercise Date: _____________, 2025 |
CUSIP: [_____________]
ISIN: [_____________]
THIS ORDINARY SHARES PURCHASE
WARRANT (the “Warrant”) certifies that, for value received, [●] or its registered assigns (the “Holder”)
is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after
the date hereof (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on _____________, 2028
(the “Termination Date”) but not thereafter, to subscribe for and purchase from Recon Technology, Ltd,
a Cayman Islands company (the “Company”), up to _________________ Ordinary Shares (as subject to adjustment hereunder,
the “Warrant Shares”). The purchase price of one Ordinary Share under this Warrant shall be equal to the Exercise Price,
as defined in Section 2(b). This Warrant shall initially be issued and maintained in the form of a security held in book-entry form and
the Depository Trust Company or its nominee (“DTC”) shall initially be the sole registered holder of this Warrant,
subject to a Holder’s right to elect to receive a Warrant in certificated form pursuant to the terms of the Warrant Agency Agreement,
in which case this sentence shall not apply.
Section 1. Definitions.
In addition to the terms defined elsewhere in this Warrant, the following terms have the meanings indicated in this Section 1:
“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Bid Price”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Ordinary Shares are then listed
or quoted on a Trading Market, the bid price of an Ordinary Share for the time in question (or the nearest preceding date) on the Trading
Market on which the Ordinary Shares are then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New
York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average per share
price of the Ordinary Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Ordinary Shares
are not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Ordinary Shares are then reported on the Pink Open Market
(or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per Ordinary Share so
reported, or (d) in all other cases, the fair market value of an Ordinary Share as determined by an independent appraiser selected in
good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid by the Company.
“Board
of Directors” means the board of directors of the Company.
“Business
Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed
to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential
employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental
authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York
generally are open for use by customers on such day.
“Commission”
means the United States Securities and Exchange Commission.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Ordinary
Shares” means ordinary shares, no par value, of the Company, and any other class of securities into which such securities may
hereafter be reclassified or changed.
“Ordinary
Shares Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire
at any time Ordinary Shares, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that
is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Ordinary Shares.
“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company,
joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Registration
Statement” means the Company’s registration statement on Form F-1 (File No. 333-282048), as amended.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Subsidiary”
means any subsidiary of the Company and shall, where applicable, also include any direct or indirect subsidiary of the Company formed
or acquired after the date hereof.
“Trading
Day” means a day on which the Ordinary Shares are traded on a Trading Market.
“Trading
Market” means any of the following markets or exchanges on which the Ordinary Shares are listed or quoted for trading on the
date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).
“Transfer
Agent” means VStock Transfer, LLC, the current transfer agent of the Ordinary Shares, with a mailing address of 18 Lafayette
Place, Woodmere, NY 11598, and a facsimile number of 646-536-3179, and any successor transfer agent of the Company.
“Underwriting
Agreement” means the underwriting agreement, dated as of ___________, 2025, among the Company and AC Sunshine Securities LLC,
as representative of the underwriters named therein, as amended, modified or supplemented from time to time in accordance with its terms.
“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Ordinary Shares are then listed
or quoted on a Trading Market, the daily volume weighted average price per share of the Ordinary Shares for such date (or the nearest
preceding date) on the Trading Market on which the Ordinary Shares are then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the
volume weighted average price per share of Ordinary Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable,
(c) if the Ordinary Shares are not then listed or quoted for trading on OTCQB or OTCQX and if prices for Ordinary Shares are then reported
on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price
per Ordinary Share so reported, or (d) in all other cases, the fair market value of an Ordinary Share as determined by an independent
appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to
the Company, the fees and expenses of which shall be paid by the Company.
“Warrant
Agency Agreement” means that certain warrant agency agreement, dated on or about the Initial Exercise Date, between the Company
and the Warrant Agent.
“Warrant
Agent” means the Transfer Agent and any successor warrant agent of the Company.
“Warrants”
means this Warrant and other Ordinary Share purchase warrants issued by the Company pursuant to the Registration Statement.
Section 2. Exercise.
a) Exercise
of Warrant. Subject to the provisions of Section 2(e) herein, exercise of the purchase rights represented by this Warrant may be made,
in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date, by delivery to
the Company of a duly executed facsimile copy or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the
form annexed hereto as Annex A (the “Notice of Exercise”), and, unless the cashless exercise procedure specified in
Section 2(c) below is specified in the applicable Notice of Exercise, delivery of the aggregate Exercise Price of the Warrant Shares specified
in the applicable Notice of Exercise as specified in this Section 2(a). Within the earlier of (i) two (2) Trading Days and (ii) the number
of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid,
the Holder shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Notice of Exercise by wire transfer
of immediately available funds or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified
in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall
any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein
to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all
of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant
to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company.
Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall
have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number
of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the
date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Trading Day of receipt of such
notice. Notwithstanding the foregoing, with respect to any Notice(s) of Exercise delivered on or prior to 4:00 p.m. (New York City time)
on the Trading Date prior to the Initial Exercise Date, which may be delivered at any time after the time of execution of the Purchase
Agreement, the Company agrees to deliver the Warrant Shares subject to such notice(s) by 4:00 p.m. (New York City time) on the Initial
Exercise Date and the Initial Exercise Date shall be the Warrant Share Delivery Date for purposes hereunder, provided that payment of
the aggregate Exercise Price (other than in the case of a cashless exercise) is received by such Warrant Share Delivery Date. The
Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following
the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given
time may be less than the amount stated on the face hereof.
Notwithstanding
the foregoing in this Section 2(a), a holder whose interest in this Warrant is a beneficial interest in certificate(s) representing this
Warrant held in book-entry form through DTC (or another established clearing corporation performing similar functions), shall effect exercises
made pursuant to this Section 2(a) by delivering to DTC (or such other clearing corporation, as applicable) the appropriate instruction
form for exercise, complying with the procedures to effect exercise that are required by DTC (or such other clearing corporation, as applicable),
subject to a Holder’s right to elect to receive a Warrant in certificated form pursuant to the terms of the Warrant Agency Agreement,
in which case this sentence shall not apply.
b) Exercise
Price. The exercise price per Ordinary Share under this Warrant shall be $_________, subject to adjustment hereunder (the “Exercise
Price”).
c) Cashless
Exercise. The Company shall use its best efforts to cause the Registration Statement to remain effective with a current prospectus
and to maintain the registration of the Ordinary Shares and of the Warrants under the Exchange Act. If at any time after the Initial Exercise
Date, there is no effective registration statement registering, or no current prospectus available for the issuance of the Warrant Shares
to the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise”
in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by
(A), where:
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(A) = |
as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Ordinary Shares on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day; |
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(B) = |
the Exercise Price of this Warrant, as adjusted hereunder; and |
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(X) = |
the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
If Warrant Shares
are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act,
the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position
contrary to this Section 2(c).
Notwithstanding anything herein to the
contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).
d) Mechanics of Exercise.
i. Delivery
of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer
Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system
and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant
Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered
in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder
is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest
of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the
aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery
to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice
of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect
to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate
Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the
number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for
any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company
shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise
(based on the VWAP of the Ordinary Shares on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per
Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery
Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is
a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement
Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading
Market with respect to the Ordinary Shares as in effect on the date of delivery of the Notice of Exercise.
ii. Delivery
of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and
upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing
the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i)
by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise; provided, however, that the Holder shall
be required to return any Warrant Shares subject to any such rescinded exercise notice concurrently with the return to Holder of the aggregate
Exercise Price paid to the Company for such Warrant Shares and the restoration of Holder’s right to acquire such Warrant Shares
pursuant to this Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).
iv. Compensation
for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if
the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section
2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, Ordinary Shares
to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a
“Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the Ordinary Shares so purchased exceeds (y) the amount obtained by
multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at
issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which
case such exercise shall be deemed rescinded) or deliver to the Holder the number of Ordinary Shares that would have been issued had the
Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Ordinary Shares having
a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of Ordinary Shares with an aggregate sale price
giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect
of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company’s failure to timely deliver Ordinary Shares upon exercise of the Warrant as
required pursuant to the terms hereof.
v. No Fractional
Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As
to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election,
either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or
round up to the next whole share.
vi. Charges,
Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental
expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant
Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however,
that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto as Annex B duly executed by the Holder and the Company may require,
as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay
all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another
established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
vii. Closing
of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.
e) Holder’s
Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise
any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise
as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting
as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)),
would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the
number of Ordinary Shares beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of Ordinary
Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of
Ordinary Shares which would be issuable upon (i) exercise of the remaining, non-exercised portion of this Warrant beneficially owned by
the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or non-converted portion
of any other securities of the Company (including, without limitation, any other Ordinary Shares Equivalents) subject to a limitation
on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder
that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the
Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained
in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion
of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant
is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation
to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall
be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes
of this Section 2(e), in determining the number of outstanding Ordinary Shares, a Holder may rely on the number of outstanding Ordinary
Shares as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B)
a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth
the number of Ordinary Shares outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm
orally and in writing to the Holder the number of Ordinary Shares then outstanding. In any case, the number of outstanding Ordinary Shares
shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder
or its Affiliates or Attribution Parties since the date as of which such number of outstanding Ordinary Shares was reported. The “Beneficial
Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any Warrants, 9.99%) of the number
of Ordinary Shares outstanding immediately after giving effect to the issuance of Ordinary Shares issuable upon exercise of this Warrant.
The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e),
provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of Ordinary Shares outstanding immediately after
giving effect to the issuance of Ordinary Shares upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e)
shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day
after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective
or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable
to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
Section 3. Certain Adjustments.
a) Stock
Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes
a distribution or distributions on its Ordinary Shares or any other equity or equity equivalent securities payable in Ordinary Shares
(which, for avoidance of doubt, shall not include any Ordinary Shares issued by the Company upon exercise of this Warrant), (ii) subdivides
outstanding Ordinary Shares into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding Ordinary
Shares into a smaller number of shares, or (iv) issues by reclassification of Ordinary Shares any shares of capital stock of the Company,
then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of Ordinary Shares (excluding
treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of Ordinary Shares
outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted
such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall
become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells
any Ordinary Share Equivalents or rights to purchase stock, warrants, securities or other property pro rata to all (or substantially all)
of the record holders of any class of Ordinary Shares (the “Purchase Rights”), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the
Holder had held the number of Ordinary Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on
exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Ordinary
Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s
right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder
shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Ordinary Shares as a result
of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time,
if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
c) Pro Rata
Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution
of its assets (or rights to acquire its assets) to all (or substantially all) of holders of Ordinary Shares, by way of return of capital
or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend,
spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”),
at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution
to the same extent that the Holder would have participated therein if the Holder had held the number of Ordinary Shares acquirable upon
complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial
Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the
date as of which the record holders of Ordinary Shares are to be determined for the participation in such Distribution (provided, however,
that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership
of any Ordinary Shares as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance
for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation).
d) Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions
effects any merger or consolidation of the Company with or into another Person, (ii) the Company or any Subsidiary, directly or indirectly,
effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one
or a series of related transactions, (iii) the Company, directly or indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of Ordinary Shares or any compulsory share exchange pursuant to which the Ordinary Shares are effectively
converted into or exchanged for other securities, cash or property, or (iv) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group
acquires more than 50% of the outstanding Ordinary Shares (not including any Ordinary Shares held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other
business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder
shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence
of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this
Warrant), the number of Ordinary Shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction
by a holder of the number of Ordinary Shares for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without
regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the
Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one Ordinary Share in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.
If holders of Ordinary Shares are given any choice as to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following
such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the
survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant in
accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the
Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder,
deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor
Entity (or its parent entity) equivalent to the Ordinary Shares acquirable and receivable upon exercise of this Warrant (without regard
to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the
exercise price hereunder to such shares of capital stock (but taking into account the relative value of the Ordinary Shares pursuant to
such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price
being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction),
and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions
of this Warrant referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and
power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor
Entity had been named as the Company herein.
e) Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, the number of Ordinary Shares deemed to be issued and outstanding as of a given date shall be the sum of the number
of Ordinary Shares (excluding treasury shares, if any) issued and outstanding.
f) Notice to Holder.
i. Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly
deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment
to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Ordinary
Shares, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Ordinary Shares, (C) the Company
shall authorize the granting to all holders of the Ordinary Shares rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification
of the Ordinary Shares, any consolidation or merger to which the Company (or any of its Subsidiaries) is a party, any sale or transfer
of all or substantially all of its assets, or any compulsory share exchange whereby the Ordinary Shares are converted into other securities,
cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice (unless such information is filed with the Commission, in which case a notice
shall not be required) stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption,
rights or warrants, or if a record is not to be taken, the date as of which the holders of the Ordinary Shares of record to be entitled
to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders
of the Ordinary Shares of record shall be entitled to exchange their Ordinary Shares for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice
or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such
notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the
Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Report on Form
6-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective
date of the event triggering such notice except as may otherwise be expressly set forth herein.
g) Voluntary
Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of
this Warrant, subject to the prior written consent of the Holder, reduce the then current Exercise Price to any amount and for any period
of time deemed appropriate by the board of directors of the Company.
Section 4. Transfer
of Warrant.
a) Transferability.
This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part,
upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required
to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for
the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants.
If this Warrant is not held in global form through DTC (or any successor depositary), this Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations
in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to
any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges
shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares
issuable pursuant thereto.
c) Warrant
Register. The Warrant Agent shall register this Warrant, upon records to be maintained by the Warrant Agent for that purpose (the
“Warrant Register”), in the name of the record Holder hereof from time to time. The Company and the Warrant Agent may
deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, absent actual notice to the contrary.
Section 5. [Reserved]
Section 6. Miscellaneous.
a) No Rights
as Stockholder until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or
other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth
in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section
2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, including if the Company is for any reason unable
to issue and deliver Warrant Shares upon exercise of this Warrant as required pursuant to the terms hereof, in no event shall the Company
be required to net cash settle an exercise of this Warrant or cash settle in any other form.
b) Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include
the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make
and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
d) Authorized
Shares.
The Company covenants
that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Ordinary Shares a sufficient number
of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the
necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action
as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation,
or of any requirements of the Trading Market upon which the Ordinary Shares may be listed. The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented
by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
Except and to the
extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate
of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate
to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the
Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior
to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts
to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary
to enable the Company to perform its obligations under this Warrant.
Before taking any
action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price,
the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
e) Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and
construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of
law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions
contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York.
Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough
of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding
by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted
by law. If either party shall commence an action, suit or proceeding to enforce any provisions of this Warrant, the prevailing party in
such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such action or proceeding. Notwithstanding the foregoing, nothing
in this paragraph shall limit or restrict the federal district court in which a Holder may bring a claim under the U.S. federal securities
laws.
f) Restrictions.
The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not
utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
g) Non-waiver
and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. No provision of this Warrant shall be construed
as a waiver by the Holder of any rights which the Holder may have under the U.S. federal securities laws and the rules and regulations
of the Commission thereunder. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply
with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts
as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those
of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
h) Notices.
Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice
of Exercise, shall be in writing and delivered personally, by e-mail, or sent by a nationally recognized overnight courier service, addressed
to the Company, at Room 601, No.1 Shui’an South Street, Chaoyang District, Beijing, 100012, People’s Republic of China, Attention:
Chief Financial Officer, email address: liujia@recon.cn, or such other email address or address as the Company may specify for such purposes
by notice to the Holders. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by e-mail, or sent by a nationally recognized overnight courier service addressed to each Holder at
the e-mail address or address of such Holder appearing on the books of the Company. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the time of transmission, if such notice or communication is delivered via
e-mail at the e-mail address set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day
after the time of transmission, if such notice or communication is delivered via e-mail at the e-mail address set forth in this Section
on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following
the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom
such notice is required to be given. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information
regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Report
on Form 6-K.
i) Limitation
of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase
price of any Ordinary Shares or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of
the Company.
j) Remedies.
The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any
action for specific performance that a remedy at law would be adequate.
k) Successors
and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable
by the Holder or holder of Warrant Shares.
l) Amendment.
This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company, on the one hand, and
the Holder, on the other hand.
m) Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings.
The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
o) Warrant Agency Agreement.
If this Warrant is held in global form through DTC (or any successor depositary), this Warrant is issued subject to the Warrant Agency
Agreement. To the extent any provision of this Warrant conflicts with the express provisions of the Warrant Agency Agreement, the provisions
of this Warrant shall govern and be controlling.
********************
(Signature Page Follows)
IN WITNESS WHEREOF, the Company has caused this Warrant
to be executed by its officer thereunto duly authorized as of the date first above indicated.
| |
RECON TECHNOLOGY, LTD. |
| |
|
|
| |
By: |
|
| |
|
Shenping Yin |
| |
|
Chief Executive Officer |
ANNEX A
NOTICE OF EXERCISE
| TO: |
RECON TECHNOLOGY, LTD. |
(1) The undersigned hereby elects to purchase ________
Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment
of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable
box):
[ ] in lawful money of the
United States; or
[ ] if permitted the cancellation
of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant
with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name
of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following
DWAC Account Number:
_______________________________
_______________________________
_______________________________
[SIGNATURE
OF HOLDER]
Name of Investing Entity: _______________________________________________________________________
Signature of Authorized Signatory of Investing
Entity: _________________________________________________
Name of Authorized Signatory: ___________________________________________________________________
Title of Authorized Signatory: ____________________________________________________________________
Date: _______________________________________________________________________________________
ANNEX B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this
form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and
all rights evidenced thereby are hereby assigned to:
| Name: |
|
| |
(Please Print) |
| |
|
| Address: |
|
| |
(Please Print) |
| |
|
| Phone Number: |
|
| |
|
| Email Address: |
|
| |
|
| Dated: _______________ __, ______ |
|
| Holder’s Signature: |
|
|
| |
|
|
| Holder’s Address: |
|
|
Signature to be guaranteed by an authorized
officer of a chartered bank, trust company or medallion guaranteed by an investment dealer who is a member of a recognized stock exchange.
Exhibit 5.1
| By Email |
_______
Campbells
LLP
Floor
4, Willow House, Cricket Square
Grand
Cayman KY1-9010
Cayman
Islands |
| |
|
| |
D +852
3708 3016 |
Recon Technology, Ltd
Room 601, No. 1 Shui’an South Street
Chaoyang District, Beijing, 100012
People’s Republic of China |
T +1 345
949 2648
F +1 345
949 8613
E aclynes@campbellslegal.com
campbellslegal.com |
| 17 March 2025 |
Our Ref:
11963-27899
Your Ref: Recon
Technology, Ltd
__________ |
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| Dear Sirs, |
CAYMAN | BVI | HONG
KONG |
Recon Technology, Ltd
We are Cayman Islands counsel for Recon Technology,
Ltd, a Cayman Islands exempted company (the “Company”), in connection with the Company’s Registration Statement
on Form F-1 originally filed with the U.S. Securities and Exchange Commission in the United States (the “Commission”)
on 9 September 2024 (“Registration Statement”), relating to the registration and proposed maximum aggregate offering
of up to $20,000,000 of Class A Ordinary Shares of the Company with a nominal or par value of US$0.0001 each (“Shares”).
In connection with rendering our opinion as set
forth below, we have reviewed and examined the following:
| 1 |
A copy of the Company’s certificate of incorporation issued by the Registrar of Companies on 21 August 2007. |
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| 2 |
Copy of the Fourth Amended and Restated Memorandum of Association and Articles of Association of the Company as adopted by the Company by a special resolution of the shareholders on 29 March 2024 (the “Shareholders Resolution”) and as filed with the Registrar of Companies certified as true by Shenping Yin pursuant to the Directors Certificate (“Constitutional Documents”). |
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| 3 |
A copy of written resolutions of the Directors of the Company dated 28 August 2024 (together with the Shareholders Resolutions, the “Resolutions”). |
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| 4 |
An electronic copy of the Registration Statement. |
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| 5 |
A copy of the Register of Directors of the Company, certified as true by Shenping Yin pursuant to the Director’s Certificate. |
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| 6 |
Copy of a Certificate of a Director of the Company dated 28 August 2024 (the “Director’s Certificate”). |
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| 7 |
A copy of the Certificate of Good Standing of the Company issued by the Registrar of Companies dated 30 August 2024 (“Certificate Date”). |
The documents set out in paragraphs 1-7 (inclusive)
above hereinafter referred to as the “Corporate Documents”. The Registration Statement and the exhibits to the Registration
Statement are referred to as the “Documents”.
The following opinion is given only as to matters
of Cayman Islands law and we express no opinion with respect to any matters governed by or construed in accordance with the laws of any
jurisdiction other than the Cayman Islands. We have assumed that there is nothing under any law (other than the laws of the Cayman Islands)
that would affect or vary the following opinion. Specifically, we have made no independent investigation of the laws of the United States
of America and we offer no opinion in relation thereto. We offer no opinion in relation to any representation or warranty given by any
party save as specifically hereinafter set forth. This opinion is strictly limited to the matters stated in it, does not apply by implication
to other matters, and only relates to (1) those circumstances or facts specifically stated herein and (2) the laws of the Cayman Islands,
as they respectively exist at the date hereof.
In giving this opinion we have assumed, without
independent verification:
| (a) |
the genuineness of all signatures and seals, the authenticity of all documents submitted to us as originals, the conformity of all copy documents or the forms of documents provided to us to their originals or, as the case may be, to the final form of the originals and that any markings showing revisions or amendments to documents are correct and complete; |
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| (b) |
that the copies produced to us of minutes of meetings and/or of resolutions (including the Resolutions) are true copies and correctly record the proceedings of such meetings and/or the subject matter which they propose to record and that all factual statements therein contained are true and correct and that any meetings referred to in such copies were duly convened and held and that all resolutions set out in such copy minutes or resolutions were duly passed and are in full force and effect and that all factual statements made in such resolutions, the Director’s Certificate and any other certificates and documents on which we have relied are true and correct (and continue to be true and correct); |
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| (c) |
that the statutory registers of directors and officers, members, mortgages and charges and the minute book of the Company are true, complete, accurate and up to date; |
| (d) |
the accuracy of all representations, warranties and covenants as to factual matters made by the parties to the Documents and any other documents reviewed by us; |
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| (e) |
the Corporate Documents will not be amended in any manner that would affect the opinions set out herein; |
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| (f) |
that there is no contractual or other prohibition (other than as may arise by virtue of the laws of the Cayman Islands) binding on the Company or on any other party prohibiting it from entering into and performing its obligations under the Documents or which materially affect, amend or vary the transactions contemplated by the Registration Statement; |
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| (g) |
the Resolutions were duly passed in the manner prescribed in the Company’s memorandum and articles of association (including, without limitation, with respect to the disclosure of interests (if any) by the directors of the Company) and have not been amended, varied or revoked in any respect; |
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| (h) |
the shareholders of the Company have not restricted the powers of the directors of the Company in any way; |
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| (i) |
the matters as described in the Registration Statement are, or will be, legal, valid, binding on and enforceable against all relevant parties in accordance with their terms under the laws of the State of New York and all other relevant laws (other than the laws of the Cayman Islands); and |
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| (j) |
the Company has received money or money’s worth in consideration for the issuance of the Shares and none of the Shares were issued for less than par value. |
Based upon the foregoing and in reliance thereon,
it is our opinion that:
| (i) |
as of the Certificate Date, the Company has been duly incorporated as an exempted company with limited liability and is validly existing and in good standing with the Registrar of Companies under the laws of the Cayman Islands; and |
| (ii) |
the Shares as described in the Registration Statement will upon the receipt of full payment, issuance and delivery in accordance with the terms of the offering described in the Registration Statement and registration in the Company’s register of members will be legally issued, fully paid and non-assessable. |
The foregoing opinion is subject to the following
reservations and qualifications:
| 1 |
Under Cayman Islands law, the register of members (shareholders) is prima facie evidence of title to shares and this register would not record a third party interest in such shares. However, there are certain limited circumstances where an application may be made to a Cayman Islands court for a determination on whether the register of members reflects the correct legal position. Further, the Cayman Islands court has the power to order that the register of members maintained by a company should be rectified where it considers that the register of members does not reflect the correct legal position. As far as we are aware, such applications are rarely made in the Cayman Islands and there are no circumstances or matters of fact known to us on the date of this opinion letter which would properly form the basis for an application for an order for rectification of the register of members of the Company, but if such an application were made in respect of the Warrant Shares, then the validity of such shares may be subject to re-examination by a Cayman Islands court. |
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| 2 |
In this opinion letter, the phrase “non-assessable” means, with respect to the issuance of shares, that a shareholder shall not, in respect of the relevant shares and in the absence of a contractual arrangement, or an obligation pursuant to the memorandum and articles of association, to the contrary, have any obligation to make further contributions to the Company’s assets (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil). |
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| 3 |
We neither express nor imply any opinion as to any representation or warranty given by the Company in the Documents as to its capability (financial or otherwise) to undertake the obligations assumed by it under the Documents. |
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| 4 |
To maintain the Company in good standing under the laws of the Cayman Islands annual fees must be paid and annual returns made to the Registrar of Companies. The annual fees are payable by the Company and will not affect the non-assessable nature of the Shares. |
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| 5 |
The obligations assumed by the Company as described in the Registration Statement will not necessarily be enforceable in all circumstances in accordance with their terms. In particular: |
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(a) |
enforcement may be limited by bankruptcy, insolvency, liquidation, reorganisation, readjustment of debts or moratorium or other laws of general application relating to, protecting or affecting the rights of creditors; |
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(b) |
enforcement
may be limited by general principles of equity. For example, equitable remedies such as specific performance may not be available, inter
alia, where damages are considered to be an adequate remedy; |
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(c) |
some
claims may become barred under relevant statutes of limitation or may be or become subject to defences of set off, counterclaim, estoppel
and similar defences; |
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(d) |
where
obligations are to be performed in a jurisdiction outside the Cayman Islands, they may not be enforceable in the Cayman Islands to the
extent that performance would be illegal under the laws of that jurisdiction; |
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(e) |
the
courts of the Cayman Islands have jurisdiction to give judgment in the currency of the relevant obligation and statutory rates of interest
payable upon judgments will vary according to the currency of the judgment. If the Company becomes insolvent and is made subject to a
liquidation proceeding, the courts of the Cayman Islands will require all debts to be proved in a common currency, which is likely to
be the "functional currency" of the Company determined in accordance with applicable accounting principles. Currency indemnity
provisions have not been tested, so far as we are aware, in the courts of the Cayman Islands; |
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(f) |
arrangements
that constitute penalties will not be enforceable; |
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(g) |
enforcement
may be prevented by reason of fraud, coercion, duress, undue influence, misrepresentation, public policy or mistake or limited by the
doctrine of frustration of contracts; |
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(h) |
provisions
imposing confidentiality obligations may be overridden by compulsion of applicable law or the requirements of legal and/or regulatory
process; |
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(i) |
the
courts of the Cayman Islands may decline to exercise jurisdiction in relation to substantive proceedings brought under or in relation
to the Documents or securities other than Ordinary Shares in matters where they determine that such proceedings may be tried in a more
appropriate forum; |
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(j) |
we
reserve our opinion as to the enforceability of the relevant provisions of the Documents to the extent that they purport to grant exclusive
jurisdiction as there may be circumstances in which the courts of the Cayman Islands would accept jurisdiction notwithstanding such provisions;
and |
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(k) |
a
company cannot, by agreement or in its articles of association, restrict the exercise of a statutory power and there is doubt as to the
enforceability of any provision in the Documents whereby the Company covenants to restrict the exercise of powers specifically given
to it under the Companies Act (as revised) of the Cayman Islands, including, without limitation, the power to increase its authorised
share capital, amend its memorandum and articles of association or present a petition to a Cayman Islands court for an order to wind
up the Company. |
We hereby consent to the use of this opinion as
an exhibit to the Registration Statement filed with the Commission and to the use of our name under the caption “Legal Matters”
in the Registration Statement. In giving such consent, we do not thereby admit that we come within the category of persons whose consent
is required under section 7 of the U.S. Securities Act of 1933, as amended, or the Rules and Regulations of the Commission thereunder.
We express no view as to the commercial terms
of the Registration Statement or whether such terms represent the intentions of the parties and make no comment with regard to warranties
or representations that may be made by the Company.
Yours faithfully
/s/ Campbells LLP
Campbells LLP
Exhibit 8.1
List of Subsidiaries
The following are the Registrant, its subsidiaries
and its variable interest entities (“VIEs”):
Registrant (Cayman Islands):
Recon Technology, Ltd
Subsidiary (Hong Kong):
Recon Investment Ltd.
Subsidiary (PRC):
Recon Hengda Technology (Beijing) Co., Ltd.
Shandong Recon Renewable Resources Technology
Co., Ltd
Guangxi Recon Renewable Resources Technology Co.,
Ltd
VIE affiliates (PRC):
Beijing BHD Petroleum Technology Co. Ltd.
Nanjing Recon Technology Co., Ltd.
Huang Hua BHD Petroleum Equipment Manufacturing
Co. LTD.
Future Gas Station (Beijing) Technology, Ltd.
(25.5% owned by Nanjing Recon Technology Co., Ltd. and 25.5% owned by Beijing BHD Petroleum Technology Co. Ltd.)
Gan Su BHD Environmental Technology Co., Ltd.
(51% owned by Beijing BHD Petroleum Technology Co. Ltd. and 19% owned by Nanjing Recon Technology Co., Ltd.)
Qing Hai BHD New Energy Technology Co., Ltd.
(75% owned by Beijing BHD Petroleum Technology Co. Ltd.)
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the reference to our firm under the caption “Experts” and to the use of our report dated October 30, 2024,
with respect to the consolidated financial statements of Recon Technology, Ltd., for the years ended June 30, 2024 and 2023 in this Registration
Statement on Form F-1/A and the related Prospectus of Recon Technology, Ltd. filed with the Securities and Exchange Commission.
/s/ Enrome LLP
Singapore
March 17, 2025
PCAOB ID
#6907
| Enrome LLP | 143 Cecil Street #19-03/04 | admin@enrome-group.com |
| GB Building, Singapore 069542 | www.enrome-group.com |
Exhibit 23.3
34/F, Tower 3, China Central Place, 77 Jianguo
Road, Beijing 100025, China
Telephone: (86-10) 5809-1000 Facsimile: (86-10)
5809-1100
Jingtian & GongCheng LLP
34/F, Tower 3, China Central Place
77 Jianguo Road, Beijing 100025
People’s Republic of China
March 17, 2025
Re: Consent Letter on Recon Technology,
Ltd – Form F-1
We are qualified lawyers of the People’s
Republic of China (the “PRC” or “China”, for the purpose of this consent only, the PRC shall not include the Hong
Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan).
We act as the PRC counsel to Recon Technology,
Ltd (the “Company”), a company incorporated under the laws of the Cayman Islands in connection with the filing on Form F-1
for the registration and proposed maximum aggregate offering of up to $20,000,000 of Class A Ordinary Shares, $0.0001 par value.
The Class A Ordinary Shares are being registered by the Company, which has engaged AC Sunshine Securities LLC to act as the placement
agent in connection with the offering of the Company’s Class A Ordinary Shares.
We hereby consent to the reference to our name
in such registration statement.
This Consent is rendered solely to you for the
filing on Form F-1 and may not be used for any other purpose. In giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the United States Securities Act of 1933, as amended, or the
rules and regulations of the SEC thereunder.
| Sincerely yours, |
|
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| /s/ Jingtian & Gongcheng LLP |
|
| Jingtian & Gongcheng LLP |
|
Exhibit 23.4
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Registration Statement on Form F-1 of our
report dated October 28, 2022 with respect to our audits of the consolidated financial statements of Recon Technology, Ltd and Subsidiaries
as of June 30, 2021 and 2022 and for each of the years in the two-year period ended June 30, 2022, which is included in the Annual Report
on Amendment No. 2 to Form 20-F, filed with the Securities and Exchange Commission. We also consent to the reference to our firm under
the heading “Experts” in the Prospectus, which is part of such Registration Statement.
We were dismissed as auditors on February 1, 2023 and, accordingly, we have not performed any
audit or review procedures with respect to any financial statements included in Amendment No.2 to Form 20-F for the periods after the
date of our dismissal.
/s/ Friedman LLP
New York, New York
March 17, 2025
Exhibit 107
Calculation of
Filing Fee Tables
F-1
(Form Type)
Recon Technology,
Ltd
(Exact Name of Registrant
as Specified in its Charter)
Table 1: Newly
Registered and Carry Forward Securities
| |
Security
Type |
Security
Class
Title |
Fee
Calculation
or Carry
Forward
Rule |
Amount
Registered(1) |
Proposed
Maximum
Offering
Price Per
Unit |
Maximum
Aggregate
Offering
Price |
Fee
Rate |
Amount of
Registration
Fee |
| Fees to Be Paid |
Equity |
Common warrants to purchase Class A Ordinary Shares (2) |
457(i) |
—
|
—
|
—
|
—
|
—
|
| |
Equity |
Class A Ordinary Shares issuable upon exercise of the common warrants (3) |
457(o) |
—
|
—
|
$20,000,000 |
0.00015310 |
$3,062.00 |
| Fees Previously Paid |
Equity |
Class A
Ordinary Shares |
457(o) |
|
|
$20,000,000 |
0.0001476 |
$2,952.00 |
| |
Total Offering Amounts |
|
$40,000,000 |
- |
- |
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Total Fees Previously Paid |
|
|
|
$2,952.00 |
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Total Fee Offsets |
|
|
|
0 |
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Net Fee Due |
|
|
|
$3,062.00 |
(1) Pursuant
to Rule 416 under the U.S. Securities Act of 1933, as amended (the “Securities Act”), the securities offered hereby
shall be deemed to cover additional securities to be offered to prevent dilution resulting from share splits, share dividends or similar
transactions.
(2) No separate fee is
required pursuant to Rule 457(i) of the Securities Act.
(3) There will be issued
one common warrant, each to purchase one Share, for every one Share offered. The common warrants are exercisable at a per share price
equal to the public offering price per Share.
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