Note 11 - Blockchain Software Application Platform Development Costs

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Research, Development, and Computer Software Disclosure [Text Block]

11. Blockchain software application platform development costs

In early

2018,

the Company announced its expansion into the blockchain industry and the related technology.

In

February 2018,

the Company entered into a contract with an unrelated entity to develop certain blockchain technology-based software application platform for internal use. Total amount of the contract was

US$4.5

million. In

March 2018,

the Company entered into a

RMB3.0

million (approximately

US$0.44

million) social network-based software application development contract with another unrelated entity, which software application the Company had further decided to be combined into the current under developing blockchain technology-based application platform, as discussed above. As of

June 30, 2019,

in accordance with ASC

350

-

40

“Intangibles-Goodwill and Other-Internal-Use Software”, the Company had capitalized approximately

US$3.72

million software development costs in the aggregate for these

two

contracts. In

August 2019,

after the preliminary testing of the beta modules and discussion with potential cooperators, the Company decided to tune and upgrade some functions of the backstage applications of the platform, which are within the service scope of the development contracts signed. The complete combined beta version of the upgraded platform is expected to be ready for trial by the end of

2019.

According to the development contracts the Company signed with the counter parties, the Company will

not

bear any development risk related loss unless the counter party has

no

fault during the development and the causes for failure is considered reasonable as consented by both parties. In the latter case, the related development loss will be shared by both parties based on further negotiation. As of the date hereof, the Company does

not

aware of any technical risks that

may

lead to failure or partial failure of these development projects.