NOTE 8 -LINE OF CREDIT, SHORT TERM DEBT AND BANK ACCEPTANCE NOTES

Line of credit (Credit Exposure)

In May 2012, we were approved up to an aggregate of $24.3 million of a credit line from the Sanmen Branch of CITIC Bank ("CITIC") through Jonway. When drawn down, the credit line was secured by land and buildings on this land owned by Jonway and guaranteed by Jonway Group. Under the above credit line, in November 2012, Jonway borrowed one year short-term loans in the aggregate amount of approximately $7.3 million. The loans were repaid in November 2013. The credit line expired in November 2013.

In November 2013, we were approved up to an aggregate of $24.5 million of a credit line, with the credit exposure of $6.4 million from the Sanmen Branch of CITIC Bank ("CITIC") through Jonway. When drawn down, the credit line was secured by land and buildings owned by Jonway and guaranteed by the related party Jonway Group. Jonway borrowed one year short-term loans in the aggregate amount of $6.4 million in November 2013. The annual interest rate is 6.6%, and the loans are due in November 2014. We have also drawn $2.7 million in the form of notes payable as of December 31, 2013. We deposited 100% cash as restricted cash as collateral for these notes payable. These notes are due in April 2014. As of December 31, 2013, the credit exposure of $6.4 million has been used, and $- million was still available for use. The credit line expires in November 2015.

In December 2012, we were approved up to an aggregate of $4.1 million of a credit line, with the credit exposure of $4.1 million from Taizhou Bank. This credit line was guaranteed by related parties. As of December 31, 2013, the total outstanding loan under this credit line was $2.1 million. The annual interest rates are from 8.46% to 8.89%.The loans are due separately in January, February and May2014, and have been repaid when due. A credit exposure of $2.0million was used in the form of notes payable of $4.0 million with restricted cash of $2.0 million deposited with the bank. As of December 31, 2013, the total credit exposure of $4.1 million has been fully used. This credit line was reduced to $2.5 million in early 2014 when it was renewed.

In December 2013, we were approved up to an aggregate of $9.2 million of a credit line from Everbright Bank. This credit line can only been used in the form of notes payable with 50% restricted cash deposited. Thus, we were approved a credit exposure of $4.6 million. This credit line was guaranteed by the shareholder Wang Huaiyi, as well as a building and land use right at the carrying value of $2.2 million. As of December 31, 2013, $8.9 million was drawn down as notes payable with restricted cash of $4.45 million deposited with the bank. As of December 31, 2013, the credit line of $8.9 million has been used, and $0.3 million ($0.15 million credit exposure) was still available for use. The credit line expires in December 2014.

In December 2012, we were also approved up to an aggregate of $4.8 million of a credit line from Industrial and Commercial Bank of China (ICBC). This credit line was secured by land and buildings on this land owned by Jonway and guaranteed by related parties. This credit line expired in December 2013.

In December 2013, we were approved up to an aggregate of $5.4 million of a credit line from Industrial and Commercial Bank of China (ICBC). This credit line was secured by land and buildings on this land owned by Jonway and guaranteed by related parties. As of December 31, 2013, the total outstanding loan under this credit line was $6.4 million, with $1.5 million restricted cash deposited with the bank. The annual interest rates are from 5.6% to 7.2%. The loans are due in various dates from February 2014 to November 2014.Loans due as of the date of this report have been repaid when due. We have also drawn $177,000 in the form of notes payable as of December 31, 2013. We deposited 100% cash as restricted cash as collateral for these notes payable, which were due in March 2014. As of December 31, 2013, a credit exposure of $4.9 million has been used, and $0.5 million was still available for use. The credit line expires in December 2014.

Short term debt (in thousands)

	12/31/2013		12/31/2012
Loan from CITIC bank	$	6,381	$	7,133
Loan from ICBC		6,381		-
Loan from Taizhou Bank		2,127		1,585
Loan from Pay-Ins Prem		72		36
	$	14,961	$	8,754

In November 2012, Jonway borrowed a one year short-term loan in the aggregate amount of approximately $7.1 million from CITIC under the credit line. The annual interest rate is 6.60%, and expires in November 2013. It has been repaid when due. In November 2013, Jonway borrowed one year short-term loans in the aggregate amount of $6.4 million. The annual interest rate is 6.6%, and the loans are due in November 2014.The loans are secured by a Maximum Amount Mortgage Contract between Jonway and CITIC dated November 11, 2013, in which land use right and a building with a total carrying amount of $5.8million as of December 31, 2013 has been pledged as security for this loan. The shareholder and CEO Alex Wang also personally guaranteed these loans.

In December 2012, Jonway entered into two short-term loans with Taizhou Bank for the aggregating amount of $1.6 million. The annual interest rates were 8.06% and 8.46% respectively, and the loans were due in February and June 2013, respectively. The loans are guaranteed by Jonway Group, the shareholder Huaiyi Wang and his two families. The loan was repaid in 2013.In July, August and November 2013, the company borrowed a total of $2.1 million short term loans at interest rates of 8.46% and 8.89% from Taizhou Bank. The loans are guaranteed by the related parties including Jonway Group, the shareholder Wang Huayi and other individuals. Loans of $1.3 million were due in January and February 2014, and were repaid when due. The remaining balance of $0.8 million will be due in May 2014.

The Company also borrowed loans from Industrial and Commercial Bank of China (ICBC) during 2013. In June 2013, Jonway borrowed a one year short-term loan of $1.1 million. The annual interest rate was 6.9%. In August 2013, Jonway borrowed a 6 months short-term loan of $0.8 million. The annual interest rate was 5.6%. In August 2013, Jonway borrowed a one year short-term loan of $ 1.2 million. The annual interest rate was 6.9%. In September 2013, Jonway borrowed a 6 months short-term loan of $0.7 million. The annual interest rate was 5.6%. In November 2013, Jonway borrowed a one year short term loan of $1.5 million. The annual interest rate was 7.2%. In December 2013, Jonway borrowed a one year short term loan of $1.1 million. The annual interest rate was 7.2%. These loans were guaranteed by the related parties including Jonway Group, the shareholder Wang Huaiyi and the shareholder and CEO Alex Wang. The Company also pledged buildings and land use right at a carrying value of $3.7 million with ICBC. Restricted cash of $1.5 million was also deposited with ICBC.

The weighted average interest rates were 7.04% and 6.51% for the years ended December 31, 2013 and 2012, respectively.

Bank acceptance notes

As of December 31, 2013, the Company has bank acceptance notes payable in the amount of $15.7 million. The notes are guaranteed to be paid by the banks and are usually for a short-term period of six (6) months. The Company is required to maintain cash deposits of 50% or 100% of the notes payable with these banks, in order to ensure future credit availability. As of December 31, 2013, the restricted cash for the notes was $9.3 million.

(in thousands)

	12/31/2013		12/31/2012
a) Bank acceptance notes payable to China Everbright bank	$	8,891	$	6,333
b) Bank acceptance notes payable to Taizhou bank		3,927		4,627
c) Bank acceptance notes payable to CITIC bank		2,700		5,608
d) Bank acceptance notes payable to ICBC		177		-
e) Bank acceptance notes payable to Yinzuo bank		-		1,268
f) Bank acceptance notes payable to Shanghai Pudong development bank		-		677
	$	15,695	$	18,513

Notes payable to China Everbright bank include 114 bank acceptance notes expiring at various maturity dates from January 2014 to June 2014. The notes payable are guaranteed by land use right and a building at a total carrying value of $2.2 million. The Company is also required to maintain cash deposits of 50% of the notes payable with the bank, in order to ensure future credit availability.

Notes payable to Taizhou bank include 68 bank acceptance notes expiring at various maturity dates from February 2014 to May 2014. The Company is required to maintain cash deposits of 50% of the notes payable with the bank, in order to ensure future credit availability.

Notes payable to CITIC bank include 2 bank acceptance notes expiring on April 24 and April 29, 2014. The Company is required to maintain cash deposits of 100% of the notes payable with the bank, in order to ensure future credit availability.

Notes payable to ICBC bank has 1 bank acceptance note due and paid in March 2014. The Company is required to maintain cash deposits of 100% of the notes payable with the bank, in order to ensure future credit availability.

Notes payable to Yinzuo bank include 21 bank acceptance notes which expired in March 2013. The Company was required to maintain cash deposits at 50% of the notes payable with the bank, in order to ensure future credit availability.

On March 13, 2012 the Company and Shanghai Pudong Development Bank signed a bank acceptance note agreement for $676,811. This bank note facility was issued to Jonway Auto's suppliers and secured by a letter of credit, valued at $676,811, of which Jonway Auto was a beneficiary. The bank acceptance notes expired on March 13, 2013.