NOTE 5–LINE OF CREDIT, SHORT TERM DEBT AND BANK ACCEPTANCE NOTES

Line of credit (Credit Exposure)

In March 2014, the Company has obtained up to an aggregate of $16.3 million of credit line with the credit exposure of $6.05 million from Citic Bank(“CITIC”) Sanmen Branch through Jonway. The line is secured by land and building owned by Jonway and guaranteed by the related party – Jonway Group. In March 2014, Jonway borrowed one year short-term loan of $1.0 million. The annual interest rate was 7.08% and the loan was 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 of $0.98 million at an annual interest rate of 6.69% with an expiration date of December 2015. We have also drawn down $10.6 million in the form of notes payable as of March 31, 2015. Except for a note payable utilizing the credit exposure of $5.05 million, we deposited 50% to 100% cash as restricted cash as collateral for these notes payable. These notes are due from July, 2015 to March, 2016. As of March 31, 2015, the credit exposure of $6.05 million has been fully used. The credit line expires in March 2016.

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, and has expired in January, 2015. This credit line was guaranteed by related parties. As of December 31, 2014, the total outstanding loans from Taizhou Bank under this credit line were $1.1 million. The loans are due separately in February and April 2015 respectively, and have been settled in February 2015.

In December 2013, we were approved for up to an aggregate of $9.2 million of a credit line from China 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. This credit line has expired as of January,2015. In April 2015, we were approved for up to an aggregate of 7.5 million of a credit line from Everbright Bank, with 50% restricted cash deposited and credit exposure of $3.75 million. The credit line expires in April 2016.As of March 31, 2015, $6.69 million was drawn down as notes payable. The amount of restricted cash deposited with the bank was $3.35 million. In July 2014, Jonway borrowed an 11 months short-term loan of $1.2 million at interest rate of 7.2%. As of March 31, 2015, the credit exposure of $3.75 million has been fully used.

In March 2014, 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 March 31, 2015, 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 6.9%. The loans are due in various dates from April 2015 to March 2016. As of March 31, 2015, a credit exposure of $4.9 million has been used, and $0.5 million was still available for use. The credit line expires in March 2017.

Short term debt (in thousands)


	March 31, 2015		December 31, 2014
Loan from CITIC bank	$	980	$	976
Loan from ICBC		6,535		6,484
Loan from Taizhou Bank		-		1,139
Loan from China Everbright Bank		1,226		1,220
Loan from Pay-Ins Prem		-		30
	$	8,741	$	9,849

In December 2014, the company borrowed a one year short term loan of $0.98 million from CITIC at the annual interest rate of 6.69%. 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 March 31, 2015 has been pledged as security for this loan. The shareholder and Co-CEO Alex Wang also personally guaranteed these loans.

In August 2014, Jonway borrowed a short-term loan from Taizhou Bank of $0.3 million at the annual interest rate of 8.93% which was due in February 2015. The loan was repaid when due. In October 2014, Jonway borrowed $0.81 million of a short term loan from Taizhou Bank. The loan was to expire in April 2015 and the annual interest rate was 8.496%.The loan was settled early in February 2015.

In April 2014, Jonway borrowed a one year short-term loan from Industrial and Commercial Bank of China (ICBC) of 0.8 million which was repaid in April 2015. The annual interest rate was 6%. In June 2014, Jonway borrowed a one year short-term loan from ICBC of $1.1 million at the annual interest rate of 6.256%. In August 2014, Jonway borrowed a one year short-term loan from ICBC of $1.1 million at the annual interest rate of 6.92%. In September 2014, Jonway borrowed a 6-month short-term loan from ICBC of $0.8 million at the annual interest rate of 5.04%. The loan of $0.8 million has been paid when due in March, 2015. In October 2014, Jonway borrowed $1.47 million of a short term loan from ICBC. The loan will expire 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 2014 at an annual interest of 6.6%. In March 2015, Jonway borrowed a one year short-term loan of $0.8 million from ICBC at an annual interest of 5.6%. 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 $3.52 million with ICBC and $1.6 million of restricted cash of March 31, 2015.

In July 2014, Jonway obtained an 11 months short-term loan of $1.2 million from China Everbright Bank 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. This loan is due in June 2015.

The weighted average interest rates were 6.9% and 6.95% for the three months ended March 31, 2015 and 2014 respectively.

Bank acceptance notes

As of March 31, 2015, the Company has bank acceptance notes payable in the amount of $17.4 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 March 31, 2015, the restricted cash for the notes was $9.0 million.

(In thousands)


	3/31/2015		12/31/2014
a) Bank acceptance notes payable to China Everbright bank	$	6,699	$	11,372
b) Bank acceptance notes payable to Taizhou bank		-		651
c) Bank acceptance notes payable to CITIC bank		10,553		5,724
d) Bank acceptance notes payable to China Merchants Bank		161		-
	$	17,413	$	17,747

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

b. Notes payable to Taizhou bank were required to maintain cash deposits at 50% to 100% of the notes payable with the bank as of December 31, 2014.

c. Notes payable to CITIC bank will be due from July 2015 to March 2016. Except for the note payable utilizing credit exposure of $6.05 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

d. Notes payable to China Merchants Bank is due in September 2015. 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 April 2015, the Company issued $0.16 million of note payable with 100% cash deposit.