Note 16 - Due to New Investors Related to Terminated Security Purchase Agreements

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Guarantee Payment and Prepayment from New Investors [Text Block]

16. Due to new investors related to terminated security purchase agreements

In

May 2015,

the Company entered into securities purchase agreements with Beijing Jinrun Fangzhou Science & Technology Co, Ltd. (“Jinrun Fangzhou”) and Dongsys Innovation (Beijing) Technology Development Co., Ltd. (“Dongsys Innovation”), public companies listed on the National Equities Exchange and Quotations of the PRC (the “NEEQ”), respectively, pursuant to which these companies agreed to purchase a certain number of shares of common stock of the Company. As of

December 31, 2017,

the Company had received the

10%

guarantee payment and

15%

prepayment in an aggregate amount equal to

US$819,000

from Jinrun Fangzhou, and the

10%

guarantee payment in an amount equal to

US$119,000

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 agreements with these

two

investors, respectively. The Company did

not

make any repayment to these investors afterwards during

2016

and

2017.

As agreed by the parties, beginning on

January 1, 2017,

the outstanding balances bear a

12%

annualized interest rate and shall be refunded to the investors

no

later than

December 31, 2017.

As of

September 30, 2018,

the Company had fully repaid Jinrun Fangzhou and Dongsys Innovation their principal and the related interest through

December 31, 2017.

Both Dongsys Innovation and Jinrun Fangzhou agreed

not

to charge additional interest in fiscal

2018.