Note 16 - Guarantee Payment and Prepayment from New Investors

3 Months Ended

Mar. 31, 2016

Guarantee Payment And Prepayment From New Investors [Abstract]

Guarantee Payment And Prepayment From New Investors [Text Block]

16. Guarantee payment and prepayment from new investors

On May 5, 2015, the Company entered into a Securities Purchase Agreement with Beijing Jinrun Fangzhou Science & Technology Co, Ltd. (“Jinrun Fangzhou”), a public company listed on the National Equities Exchange and Quotations of the PRC (the “NEEQ”), pursuant to which Jinrun Fangzhou agreed to purchase 2,800,000 shares of common stock of the Company for an aggregate purchase price of US$3,500,000. On May 26, 2015, the Company entered into another Securities Purchase Agreement with Dongsys Innovation (Beijing) Technology Development Co., Ltd. (“Dongsys Innovation”), a public company listed on the NEEQ, pursuant to which Dongsys Innovation agreed to purchase 1,000,000 shares of common stock of the Company for an aggregate purchase price of US$1,250,000.

In accordance with the Securities Purchase Agreements described above, Jinrun Fangzhou and Dongsys Innovation were required to pay 10% of its respective total purchase price as guarantee payments within five days of the date the agreements were signed, and pay an additional 15% of its respective total purchase price within thirty days of the date of the agreements were signed, and pay the remaining 75% of its respective purchase price at the closing which shall take place on the date mutually agreed to by the parties.

As of March 31, 2016, the Company has received the 10% guarantee payment and 15% prepayment in an aggregate amount equal to US$829,000 from Jinrun Fangzhou, and the 10% guarantee payment in an amount equal to US$120,000 from Dongsys Innovation, respectively.

Due to certain restriction stipulated in the “Measures for Overseas Investment Management” issued by the Ministry of Commerce of the PRC ( the “MOFCOM”), the Company and its investors experienced difficulties in obtaining approval for the transactions from the MOFCOM. As a result, on May 12, 2016, the Company terminated the security purchase agreement with the two investors, respectively. The Company expects to refund the guarantee payment and prepayment to the investors before December 31, 2016. As agreed by the parties, if the Company fails to fully refund the amounts before December 31, 2016, the Company will bear a 12% annualized interest rate for the unpaid amounts and the amounts shall be refunded to the investors no later than December 31, 2017.