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

Line of credit (Credit Exposure)

In November 2013, we were approved up to an aggregate of $24.3 million of a credit line, with the credit exposure of $6.3 million from the Sanmen Branch of CITIC Bank (“CITIC”) through Jonway. In March 2014, the credit exposure increased by $1.0 million to $7.3 million. In November 2014, a land use right pledged to CITIC Bank was released to the company and the credit exposure approved by the bank was $6.02 million. When drawn down, the credit line is 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 $6.3 million in November 2013. In April 2014, the company partially repaid $0.56 million. The annual interest rate is 6.6%, and the loans are due in November 2014. The company repaid the loans when they became due. In March 2014, Jonway borrowed one year short-term loan of $1.0 million. The annual interest rate is 7.08% and the loan is due in March 2015. The company early settled the loan in December 2014. The company borrowed a one year short term loan in December 2014 at an annual interest rate of 6.6%. We have also drawn down $5.7 million in the form of notes payable as of December 31, 2014. Except for a note payable utilizing the credit exposure of $5.04 million, we deposited 50% cash as restricted cash as collateral for these notes payable. These notes are due from March 2015 to November, 2015. As of December 31, 2014, the credit exposure of $6.02 million has been fully used. 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 from Taizhou Bank. This credit line was reduced to $2.4 million in early 2014 when it was renewed. This credit line was guaranteed by related parties. As of December 31, 2014, the total outstanding loans under this credit line were $1.1 million. The loans are due separately in February and April 2015 respectively. The annual interest rates are 8.89% and 8.93% respectively. A credit exposure of $0.33 million was used in the form of notes payable of $0.65 million with restricted cash of $0.33 million being deposited with the bank. As of December 31, 2014, a total credit exposure of $1.46 million has been used. The bank informed the company that the credit line will not renew after the settlement of outstanding borrowings in early 2015.

In December 2013, we were approved for 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 $2.1 million. As of December 31, 2014, $11.4 million was drawn down as notes payable. The amount of restricted cash deposited with the bank was $8.0 million. In June 2014, Jonway borrowed a 6 months short-term loan of $0.31 million at interest rate of 7.28%. The company repaid the loan when it became due. In July 2014, Jonway borrowed an 11 months short-term loan of $1.2 million at interest rate of 7.2%. As of December 31, 2014, the credit exposure of $4.6 million has been fully used. The credit line expires in December 2014 and not yet renewed as of December 31, 2014.

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 owned by Jonway and guaranteed by related parties. As of December 31, 2014, the total outstanding loan under this credit line was $6.5 million with $1.6 million of restricted cash deposited with the bank. The annual interest rates are from 5.0% to 6.6%. The loans are due in various dates from March to November 2015. Jonway also drew down $0.49 million in the form of a note payable as of June 2014. We deposited 100% cash as restricted cash for the note payable. The note payable was settled when it matured. As of December 31, 2014, 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 and not yet renewed as of December 31, 2014.

Short term debt (in thousands)

	December 31, 2014		December 31, 2013
Loan from CITIC bank	$	976	$	6,381
Loan from ICBC		6,484		6,381
Loan from Taizhou Bank		1,139		2,127
Loan from China Everbright Bank		1,220		0
Loan from Pay-Ins Prem		30		72
	$	9,849	$	14,961

In November 2013, Jonway borrowed one year short-term loans in the aggregate amount of $6.3 million from CITIC. The annual interest rate is 6.6%, and the loans are due in November 2014. In April 2014, Jonway partially repaid $0.56 million. In November 2014, the company repaid the loans when they come due. In March 2014, Jonway borrowed $0.98 million from CITIC Bank. The loan expires in March 2015 and the annual interest rate is 7.08%. The company settled the loan in December 2014 before it comes due. In December 2014, the company borrowed a one year short term loan of $0.98 million at the annual interest rate of 6.6%. The loans are secured by a Maximum Amount Mortgage Contract between Jonway and CITIC dated November 3, 2014, in which a land use right and a building with a total carrying amount of $5.5 million as of December 31, 2014 has been pledged as security for this loan. The shareholder and Co-CEO Alex Wang also personally guaranteed these loans.

In July, August and November 2013, the company borrowed a total of $2.1 million of short term loans at interest rates of 8.46% and 8.89% from Taizhou Bank. The loans are guaranteed by 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 was repaid in May 2014. Jonway borrowed a short-term loan of $0.3 million in February 2014 at the annual interest rate of 8.89% which was repaid in August 2014. Jonway borrowed a short-term loan of $0.8 million in May 2014 at the annual interest rate of 8.89% which is due in November 2014. In August, Jonway borrowed a short-term loan of $0.3 million at the annual interest rate of 8.93% which is due in February 2015. The loan was repaid when due. In October 2014, Jonway repaid $0.81 million of a short term loan to Taizhou Bank when it became due. In October 2014, Jonway borrowed $0.81 million of a short term loan from Taizhou Bank. The loan expires in April 2015 and the annual interest rate is 8.496%.

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 at the annual interest rate of 6.9%. The loan was due and repaid in June 2014. In August 2013, Jonway borrowed a 6 months short-term loan of $0.8 million. The annual interest rate was 5.6%. The loan was repaid when due in February 2014. In August 2013, Jonway borrowed a one year short-term loan of $ 1.1 million. The annual interest rate was 6.9%. It was due and repaid. In September 2013, Jonway borrowed a 6 months short-term loan of $0.7 million. The annual interest rate was 5.6%. The loan was repaid when due in March 2014. In November 2013, Jonway borrowed a one year short term loan of $1.5 million. The annual interest rate was 7.2%. The loan was repaid when it became due. In December 2013, Jonway borrowed a one year short term loan of $1.1 million. The annual interest rate was 7.2%. The company repaid the loan when it came due. In March 2014, Jonway borrowed a 6-month short-term loan of $0.8 million with 100% cash deposited as collateral for the loans. The annual interest rate is 5.6% and repaid when due in September 2014. In April 2014, Jonway borrowed a one year short-term loan of 0.8 million with 100% cash deposited as collateral for the loans. The annual interest rate is 6%. In June 2014, Jonway borrowed a one year short-term loan of $1.1 million at the annual interest rate of 6.256%. In August 2014, Jonway borrowed a one year short-term loan of $1.1 million at the annual interest rate of 6.92%. In September 2014, Jonway borrowed a 6-month short-term loan of $0.8 million at the annual interest rate of 5.04%. In October 2014, Jonway borrowed $1.46 million of a short term loan from ICBC. The loan expires in October 2015 and the annual interest rate is 6.6%. The company borrowed a one year short term loan of $1.1 million in November at an annual interest of 6.6%. These loans were guaranteed by related parties including Jonway Group, the shareholder Wang Huaiyi and the shareholder and Co-CEO Alex Wang. The Company also pledged buildings and a land use right with a carrying value of $3.54 million with ICBC and $1.6 million of restricted cash of December 31, 2014.

In June 2014, the company borrowed a 6 month short-term loan of $0.31 million at an interest rate of 7.28% from China Everbright Bank. The loan was repaid when it became due in December 2014. In July 2014, Jonway borrowed an 11 months short-term loan of $1.2 million at the annual interest rate of 7.2%. The loans were guaranteed by the shareholder Wang Huaiyi, as well as a building and land use right with a carrying value of $2.1 million.

The weighted average interest rates were 7.0% and 7.04% for the years ended December 31, 2014 and 2013, respectively.

Bank acceptance notes

As of December 31, 2014, the Company has bank acceptance notes payable in the amount of $17.7 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, 2014, the restricted cash for the notes was $9.0 million.

	(In thousands)
	December 31, 2014		December 31, 2013
a) Bank acceptance notes payable to China Everbright bank	$	11,372	$	8,891
b) Bank acceptance notes payable to Taizhou bank		651		3,927
c) Bank acceptance notes payable to CITIC bank		5,724		2,700
d) Bank acceptance notes payable to ICBC		-		177
	$	17,747	$	15,695

a. Notes payable to China Everbright bank have various maturity dates from January 2015 to June 2015. The notes payable are guaranteed by a land use right and a building with a total carrying value of $2.1 million. The Company is also required to maintain cash deposits at 50% of the notes payable with the bank, in order to ensure future credit availability. In January 2015, the company repaid the note payable when it became due.

b. Notes payable to Taizhou bank have various maturity dates in February, 2015. The Company is required to maintain cash deposits at 50% to 100% of the notes payable with the bank, in order to ensure future credit availability. The note payable was repaid when due.

c. Notes payable to CITIC bank will be due from March 2015 to November 2015. Except for the note payable utilizing credit exposure of $5.04 million, the Company is required to maintain cash deposits at 100% of the notes payable with the bank, in order to ensure future credit availability. In January 2015, the company issued $4.9 million of notes payable with 100% cash deposits.

d. There is no notes payable due to ICBC at the year ended December 31, 2014. The Company is required to maintain cash deposits at 50% to 100% of the notes payable with the bank, in order to ensure future credit availability.