NOTE 19. COMMITMENTS AND CONTINGENCY

(a)

Office Leases

The Company leases three offices in Beijing (two for BHD; one for Recon-JN) and one office in Nanjing for Nanjing Recon. Future payments under such leases are as follows as of June 30, 2016:

	Twelve months ending June 30,
	Office lease payment
	RMB		U.S. Dollars
2017	¥	1,264,000	$	190,237
2018		540,000		81,272
Total	¥	1,804,000	$	271,509

(b)

Contingency

The Labor Contract Law of the PRC requires employers to assure the liability of severance payments if employees are terminated and have been working for the employers for at least two years prior to January 1, 2008. The employers will be liable for one month of severance pay for each year of the service provided by the employees. As of June 30, 2016, the Company estimated its severance payments of approximately ¥1.6 million ($0.24 million) which has not been reflected in its consolidated financial statements, because management cannot predict what the actual payment, if any will be in the future.

About Commitments Disclosures

Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.

Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.

Recon Technology, Ltd Commitments Disclosure

About Commitments Disclosures

Other Available Disclosures