Note 20 - Concentration of Risk

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

20. Concentration of risk

Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, term deposit and accounts receivable. As of

June 30, 2017

and

December 31, 2016,

substantially all of the Company’s cash and cash equivalents and term deposit were held by major financial institutions located in Mainland China, which management believes are of high credit quality. For accounts receivables, the Company extends credit based on an evaluation of the customer’s financial condition, generally without requiring collateral or other security. In order to minimize the credit risk, the Company delegated a team responsible for credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. Further, the Company reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate allowances are made for doubtful accounts. In this regard, the Company considers that the Company’s credit risk for accounts receivables is significantly reduced.

Risk arising from operations in foreign countries

All of the Company’s operations are conducted within the PRC. The Company’s operations in the PRC are subject to various political, economic, and other risks and uncertainties inherent in the PRC. Among other risks, the Company’s operations in the PRC are subject to the risks of restrictions on transfer of funds, changing taxation policies, foreign exchange restrictions; and political conditions and governmental regulations.

Currency convertibility risk

Significant part of the Company’s businesses is transacted in RMB, which is

not

freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices and signed contracts. These exchange control measures imposed by the PRC government authorities

may

restrict the ability of the Company’s PRC subsidiaries and VIEs to transfer its net assets, which to the Company through loans, advances or cash dividends.

Concentration of customers

For the

six

months ended

June 30, 2017,

one

customer individually accounted for

21%

of the Company’s revenues. For the

three

months ended

June 30, 2017,

the same

one

customer individually accounted for

21%

of the Company’s revenues. Except for the aforementioned customer, there was

no

other single customer who accounted for more than

10%

of the Company’s revenues for the

six

or

three

months ended

June 30, 2017.

There was

no

single customer who accounted for more than

10%

of the Company’s revenues for the

six

or

three

months ended

June 30, 2016.

As of

June 30, 2017,

three

customers individually accounted for

28%,

17%

and

11%

of the Company’s accounts receivables, respectively. As of

December 31, 2016,

two

customers individually accounted for

22%

and

14%

of the Company’s accounts receivable, respectively. Except for the aforementioned, there was

no

other single customer who accounted for more than

10%

of the Company’s accounts receivable as of

June 30, 2017

or

December 31, 2016.

Concentration of suppliers

For the

six

months ended

June 30, 2017,

two

suppliers individually accounted for

75%

and

16%

of the Company’s cost of revenues, respectively. For the

three

months ended

June 30, 2017,

the same

two

suppliers individually accounted for

81%

and

11%

of the Company’s cost of revenues, respectively. Except for the afore-mentioned, there was

no

other single supplier who accounted for more than

10%

of the Company’s cost of revenues for the

six

or

three

months ended

June 30, 2017.

For the

six

months ended

June 30, 2016,

two

suppliers individually accounted for

60%

and

12%

of the Company’s cost of revenues, respectively. For the

three

months ended

June 30, 2016,

the same

two

suppliers individually accounted for

60%

and

10%

of the Company’s cost of revenues, respectively. Except for the afore-mentioned, there was

no

other single supplier who accounted for more than

10%

of the Company’s cost of revenues for the

six

or

three

months ended

June 30, 2016.