CERTAIN RISKS AND CONCENTRATION

3 Months Ended

Mar. 31, 2012

CERTAIN RISKS AND CONCENTRATION

NOTE 20      CERTAIN RISKS AND CONCENTRATION

Credit risk and major customers

As of March 31, 2012 and December 31, 2011, 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 three months ended March 31, 2012 and 2011, all of the Company’s sales arose in the PRC.  In addition, all accounts receivable as of March 31, 2012 and December 31, 2011 were due from customers located in the PRC.

Two customers accounted for 26.9% and 10.3% of the Company’s revenue for the three months ended March 31, 2012, respectively, and three customers accounted for 19.3%, 14.9% and 14.1% of the Company’s revenue for the three months ended March 31, 2011, respectively. There was no other single customer who accounted for more than 10% of the Company’s revenue for three months ended March 31, 2012 or 2011.

Two customers accounted for 35.3% and 10.0% of total accounts receivable of the Company as of March 31, 2012, respectively, and one customer accounted for 33.6% of total accounts receivable of the Company as of December 31, 2011. There was no other single customer who accounted for 10% or more of the Company’s accounts receivable as of March 31, 2012 and December 31, 2011.

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.