NOTE 8. Long-term investment

On June 28, 2013, the Company purchased 2,800,000 restricted shares of Avalon Oil and Gas, Inc. ("Avalon") for $0.089 per share, or approximately ¥1.5 million ($250,000). Since the restriction for the shares is for two years, the Company was able to acquire the shares at 50% of the market value. As a result, Recon owns 32.22% of Avalon's outstanding shares. The investment was accounted for using the equity method and no gain or loss from equity investment was recorded for the year ended June 30, 2013 due to immateriality. As of December 31, 2013, Recon owned 24.98% of Avalon’s outstanding shares due to Avalon issuing more shares. Avalon is an independent US domestic oil and natural gas producer listed on the OTCBB under the ticker symbol AOGN. Avalon is building a portfolio of oil and gas producing properties to generate asset growth. Since Avalon’s operating results for six months ended December 31, 2013 were not available as of the filing date, the Company used Avalon’s operating results from July to September as the best estimate to calculate its investment loss. For the three and six months ended December 31, 2013, Avalon had revenue of approximately $40,000 and $80,000 (estimated), net loss of $0.2 million and $0.4 million (estimated), respectively. The Company recorded unrealized loss from investment of ¥360,466 ($58,992) and ¥735,080 ($120,300) for the three and six months ended December 31, 2013.