NOTE 6. PURCHASE ADVANCES

The Company purchased products and services from a third party and a related party during the normal course of business. Purchase advances consisted of the following:

	June 30, 2015		June 30, 2016		June 30, 2016
Third Party	RMB		RMB		U.S. Dollars
Prepayment for inventory purchase	¥	22,845,030	¥	17,914,552	$	2,696,216
Allowance for doubtful accounts		(4,222,492)		(16,591,247)		(2,497,053)
Total	¥	18,622,538	¥	1,323,305	$	199,163

Provision for purchase advances were ¥2,862,231 and ¥12,368,755 ($1,861,550) for the years ended June 30, 2015 and 2016, respectively. The Company recorded allowance for these down payments and will continue to try to collect or get inventories delivered. These payments were advanced for certain customized equipment of the planned projects. As those projects were delayed or canceled or there is rare chance to be profitable, the Company decided to suspend those projects and recorded allowances related to advanced payments for those projects as the Company may not be able to receive those funds back. Management is still making efforts to collect partially or negotiate with venders for some other alternative solutions to minimize the Company’s loss.

Purchases from related parties consisted of the following:

	June 30, 2015		June 30, 2016		June 30, 2016
Related Party	RMB		RMB		U.S. Dollars
Xiamen Huangsheng Hitek Computer Network Co. Ltd. (A)	¥	394,034	¥	-	$	-
Total - related-parties, net	¥	394,034	¥	-	$	-

One of the Founders of the Company and his family member collectively own 57% of Xiamen Huasheng Haitian Computer Network Co. Ltd. Between August 10, 2015 and September 1, 2015, materials purchased have been delivered to the Company and this balance was settled in full.

Movement of allowance for doubtful accounts is as follows:

	June 30, 2015		June 30, 2016		June 30, 2016
	RMB		RMB		U.S. Dollars
Beginning balance		1,360,261		4,222,492		635,503
Charge to expense		2,862,231		12,368,755		1,861,550
Ending balance	¥	4,222,492	¥	16,591,247	$	2,497,053