CERTAIN RISKS AND CONCENTRATION

9 Months Ended

Sep. 30, 2011

CERTAIN RISKS AND CONCENTRATION

NOTE 19     CERTAIN RISKS AND CONCENTRATION

Credit risk and major customers

As of September 30, 2011 and December 31, 2010, substantially all of the Company’s cash including cash on hand and deposits in accounts were maintained within the PRC where there is currently no rule or regulation in place for obligatory insurance to cover bank deposits in the event of a bank’s failure. However, the Company has not experienced any such losses and believes it is not exposed to any significant risks on its cash in bank accounts.

For the nine months ended September 30, 2011 and 2010, all of the Company’s sales arose in the PRC.  In addition, all accounts receivable as of September 30, 2011 and December 31, 2010 were due from customers located in the PRC.

Except for three customers which accounted for 24.9%, 12.2% and 10.4% of the Company’s revenue for the nine months ended September 30, 2011, respectively, there was no other single customer who accounted for more than 10% of the Company’s revenue for the nine months ended September 30, 2011 or 2010.

Except for one customer which accounted for 34.1% of the Company’s revenue for the three months ended September 30, 2011, there was no other single customer who accounted for more than 10% of the Company’s revenue for the three months ended September 30, 2011 or 2010.

There was one customer who accounted for 35.3% of total accounts receivable of the Company as of September 30, 2011. There were two customers who accounted for 20.5% and 15.2%, respectively, of total accounts receivable of the Company as of December 31, 2010. There was no other customer who accounted for 10% or more of the Company’s accounts receivable as of September 30, 2011 or December 31, 2010.

Risk arising from operations in foreign countries

Substantially all of the Company’s operations are conducted in China. The Company’s operations are subject to various political, economic, and other risks and uncertainties inherent in China. Among other risks, the Company’s operations are subject to the risks of restrictions on transfer of funds; export duties, quotas, and embargoes; domestic and international customs and tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations.