NOTE 7 – LINE OF CREDIT, SHORT TERM DEBT AND BANK ACCEPTANCE NOTES

Line of credit (Credit Exposure)

In June 2015, we were approved for up to an aggregate of $7.1 million of a credit line from Everbright Bank, with 50% restricted cash deposited and credit exposure of $3.6 million. The credit line expires in June 2016. As of March 31, 2016 and December 31, 2015, $7.1 million was drawn down as notes payable. The amount of restricted cash deposited with the bank was $3.6 million. As of March 31, 2016, the line of credit has been fully utilized.

In March 2014, the Company has obtained up to an aggregate of $15.5 million of credit line with the credit exposure of $5.7 million from CITIC Sanmen Branch through Jonway Auto. The line is secured by land and building owned by Jonway Auto and guaranteed by the related party – Jonway Group. As of March 31, 2016, the Company borrowed aggregated $3.6 million loans with various due dates in April 28, 2016 to March 25, 2017. The loans carried at annual interests from 5.92% to 5.96%. The Company has also drawn down $9.3 million in the form of notes payable as of March 31, 2016. The Company deposited $7.2 million restricted cash as collateral for these notes payable. These notes are due from April 2016 to September 2016. As of March 31, 2016, the unused line of credit was approximately $8,000. The Company renewed the credit line of approximately $23.3 million from CITIC Sanmen Branch through Jonway Auto. The new credit line is secured by a land use right and a building with a total carrying amount of $5.2 million as of March 31, 2016. The shareholder and CEO Alex Wang also personally guaranteed on this credit line. The credit line expires on March 31, 2018.

In March 2014, we were approved up to an aggregate of $5.1 million of a credit line from ICBC. This credit line was secured by land and buildings owned by Jonway Auto and guaranteed by related parties. As of March 31, 2016, the total outstanding loan under this credit line was $3.9 million. The annual interest rates are from 5.9% to 6.7%. The loans are due in various dates from June 2016 to November 2016. As of March 31, 2016, the unused line of credit was approximately $1.2 million.

Short term loans as of March 31, 2016 and December 31, 2015 are presented below:

		March 31, 2016		December 31, 2015

Loan from CITIC bank	(a)	$	3,629	$	3,081
Loan from ICBC	(b)		3,878		4,621
			-
		$	7,507	$	7,702

(a)

In October 2015, Jonway Auto borrowed a half year short-term loan of $3.1 million at annual interest rate of 5.9%. The loan is due on April 28, 2016. On March 25, 2016, Jonway Auto further borrowed a one year loan of $0.5 million at annual interest rate of 6.0%. The loan is due on March 25, 2017. All loans are secured by a Maximum Amount Mortgage Contract between Jonway Auto and CITIC dated November 3, 2014, in which a land use right and a building with a total carrying amount of $5.2 million as of March 31, 2016 has been pledged as security for these loans. The shareholder and CEO Alex Wang also personally guaranteed these loans. Subsequent to March 31, 2016, the Company renewed the loan of $3.1 million at annual interest of 5.9% with CITIC bank upon the loan's maturity on April 28, 2016.

(b)

In March 2015, the company borrowed a one year short-term loan of $0.8 million from ICBC at an annual interest of 5.4% and fully repaid the loan upon maturity in March 2016. In June 2015, the company borrowed a one year short-term loan of $0.3 million from ICBC at an annual interest rate of 5.92%. In July 2015, the Company borrowed a one year short-term loan of $1.1 million from ICBC at an annual interest rate of 6.7%. In October 2015, the Company borrowed a one year short-term loan of $1.4 million at an annual interest of 6.4%. In November 2015, the Company borrowed a one year short-term loan of $1.1 million at an annual interest rate of 6.1%. These loans were guaranteed by related parties including Jonway Group, the shareholder Wang Huaiyi and the shareholder and CEO Alex Wang. The Company also pledged buildings and a land use right with a carrying value of $1.4 million with ICBC.

The weighted average interest rates were 6.1% and 6.9% for the three months ended March 31, 2016 and 2015, respectively.

Bank acceptance notes

As of March 31, 2016, the Company has bank acceptance notes payable in the amount of $17.2 million. The notes are guaranteed to be paid by the banks and are usually for a short-term period of nine months. The Company is required to maintain cash deposits of 50% or 100% of the notes payable with these bank, in order to ensure future credit availability. As of March 31, 2016, the restricted cash for the notes was $11.6 million. Bank acceptance notes are presented below:

		March 31, 2016		December 31, 2015

Bank acceptance notes payable to China Everbright Bank	(a)	$	7,135	$	7,086
Bank acceptance notes payable to CITIC Bank	(b)		9,345		6,428
Bank acceptance notes payable to Shanghai Pudong Development bank	(c)		769		852
		$	17,249	$	14,366

(a)

Notes payable to China Everbright bank have various maturity dates in June 2016. The notes payable are guaranteed by a land use right and a building with a total carrying value of $2.0 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.

(b)

Notes payable to CITIC bank will be due in April to September 2016. Except for the note payable utilizing credit exposure of $2.1 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.

(b)

Notes payable to Shanghai Pudong Development Bank will be due in May and June, 2016. The company is required to maintain cash deposits at 100% of the notes payable with the bank.