See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements
.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of presentation, significant concentrations and risks
(a) Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by rules and regulations of the United States Securities and Exchange Commission ("SEC"). The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements of China XD Plastics Company Limited ("China XD") and subsidiaries (collectively, the "Company"). The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated balance sheet of the Company as of December 31, 2016, and the related consolidated statements of comprehensive income, changes in equity and cash flows and related notes to the condensed consolidated financial statements for the year then ended, included in the Company's Annual Report on Form 10-K filed with the SEC on March 16, 2017.
In the opinion of the management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the financial position as of September 30, 2017, the results of operations and cash flows for the nine-month periods ended September 30, 2017 and 2016, have been made.
The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the recoverability of the carrying amounts of property, plant and equipment, the realizability of inventories, the useful lives of property, plant and equipment, the collectability of accounts receivable, the fair values of stock-based compensation awards, and the accruals for tax uncertainties and other contingencies. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.
(b) Significant concentrations and risks
Sales concentration
The Company sells its products primarily through approved distributors in the People's Republic of China (the "PRC"). To a lesser extent, the Company also sells its products to an overseas customer in the Republic of Korea (the "ROK"). The Company's sales are highly concentrated. Sales to distributors and end customer individually exceeded 10% of the Company's revenues for the three-month and nine-month periods ended September 30, 2017 and 2016, are as follows:
|
|
Three-Month Period Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
US$
|
|
|
%
|
|
|
US$
|
|
|
%
|
|
Distributor A, located in PRC
|
|
|
45,073,914
|
|
|
|
14.5
|
%
|
|
|
47,992,568
|
|
|
|
14.4
|
%
|
Distributor B, located in PRC
|
|
|
34,507,661
|
|
|
|
11.1
|
%
|
|
|
39,173,767
|
|
|
|
11.8
|
%
|
Distributor C, located in PRC
|
|
|
23,839,509
|
|
|
|
7.7
|
%
|
|
|
34,149,286
|
|
|
|
10.3
|
%
|
Direct Customer D, located in ROK
|
|
|
14,117,640
|
|
|
|
4.5
|
%
|
|
|
37,008,440
|
|
|
|
11.2
|
%
|
Total
|
|
|
117,538,724
|
|
|
|
37.8
|
%
|
|
|
158,324,061
|
|
|
|
47.7
|
%
|
|
|
Nine-Month Period Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
US$
|
|
|
%
|
|
|
US$
|
|
|
%
|
|
Distributor A, located in PRC
|
|
|
129,108,116
|
|
|
|
15.0
|
%
|
|
|
122,731,035
|
|
|
|
14.9
|
%
|
Distributor B, located in PRC
|
|
|
98,428,711
|
|
|
|
11.4
|
%
|
|
|
106,653,182
|
|
|
|
12.9
|
%
|
Distributor C, located in PRC
|
|
|
75,521,449
|
|
|
|
8.8
|
%
|
|
|
91,437,791
|
|
|
|
11.1
|
%
|
Distributor E, located in PRC
|
|
|
63,132,381
|
|
|
|
7.3
|
%
|
|
|
85,542,045
|
|
|
|
10.4
|
%
|
Total
|
|
|
366,190,657
|
|
|
|
42.5
|
%
|
|
|
406,364,053
|
|
|
|
49.3
|
%
|
The Company expects revenues from these distributors and end customer to continue to represent a substantial portion of its revenue in the future. Any factor adversely affecting the automobile industry in the PRC or the business operations of these customers will have a material effect on the Company's business, financial position and results of operations.
Purchase concentration of raw materials and equipment
The principal raw materials used for the Company's production of modified plastics products are plastic resins, such as polypropylene, ABS and nylon.
The Company purchases its raw materials through a limited number of distributors, which individually exceeded 10% of the Company's total raw material purchases, accounted for approximately 44.5% (four distributors) and 62.5% (five distributors) of the Company's total raw materials purchases for the three-month periods ended September 30, 2017 and 2016, respectively, and 47.0% (four distributors) and 68.1% (five distributors) of the Company's total raw materials purchases for the nine-month periods ended September 30, 2017 and 2016, respectively. Management believes that other suppliers could provide similar raw materials on comparable terms. A change in suppliers, however, could cause a delay in manufacturing and a possible loss of sales, which would adversely affect the Company's business, financial position and results of operations.
The Company purchased equipment from two major equipment distributors, which accounted for 96.0% of the Company's total equipment purchases for the nine-month period ended September 30, 2016. The Company didn’t have equipment purchase from these two major equipment distributors for the three-month and nine-month periods ended September 30, 2017, or the three-month period ended September 30, 2016. Management believes that other suppliers could provide similar equipment on comparable terms. A change in suppliers, however, could cause a delay in manufacturing and a possible loss of sales, which would adversely affect the Company's business, financial position and results of operations.
Cash concentration
Cash and cash equivalents, short-term restricted cash, time deposits and long-term restricted cash included in other non-current assets mentioned below maintained at banks consist of the following:
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
US$
|
|
|
US$
|
|
RMB denominated bank deposits with:
|
|
|
|
|
|
|
Financial Institutions in the PRC
|
|
|
529,330,566
|
|
|
|
464,427,328
|
|
Financial Institutions in Hong Kong Special Administrative Region ("Hong Kong SAR")
|
|
|
8,205
|
|
|
|
7,946
|
|
Financial Institution in Dubai, United Arab Emirates ("UAE")
|
|
|
59
|
|
|
|
-
|
|
U.S. dollar denominated bank deposits with:
|
|
|
|
|
|
|
|
|
Financial Institution in the U.S.
|
|
|
28,416
|
|
|
|
20,192
|
|
Financial Institutions in the PRC
|
|
|
18,466
|
|
|
|
18,025
|
|
Financial Institution in Hong Kong SAR
|
|
|
1,753,363
|
|
|
|
1,629,199
|
|
Financial Institution in Macau Special Administrative Region ("Macau SAR")
|
|
|
2,117
|
|
|
|
1,810
|
|
Financial Institution in Dubai, UAE
|
|
|
2,675
|
|
|
|
139,201
|
|
Euro denominated bank deposits with:
|
|
|
|
|
|
|
|
|
Financial institution in Dubai, UAE
|
|
|
63
|
|
|
|
-
|
|
HK dollar denominated bank deposits with:
|
|
|
|
|
|
|
|
|
Financial institution in Hong Kong SAR
|
|
|
80
|
|
|
|
148
|
|
Dirham denominated bank deposits with:
|
|
|
|
|
|
|
|
|
Financial institution in Dubai, UAE
|
|
|
11,721
|
|
|
|
53,647
|
|
The bank deposits with financial institutions in the PRC are insured by the government authority for up to RMB500,000 The bank deposits with financial institutions in the Hong Kong SAR are insured by the government authority for up to HK$500,000. The bank deposits with financial institutions in the Macau SAR are insured by the government authority for up to MOP$500,000. The bank deposits with financial institutions in the Dubai, UAE are not insured by the government authority. Total bank deposits amounting to $1,569,885 and $1,207,996 are insured as of September 30, 2017 and December 31, 2016, respectively. The Company has not experienced any losses in uninsured bank deposits and does not believe that it is exposed to any significant risks on cash held in bank accounts. To limit exposure to credit risk, the Company primarily places bank deposits with large financial institutions in the PRC, Hong Kong SAR, Macau SAR and Dubai, UAE with acceptable credit rating.
Cash deposits in bank that are restricted as to withdrawal or usage for up to 12 months are reported as restricted cash in the condensed consolidated balance sheets and excluded from cash and cash equivalents in the condensed consolidated statements of cash flows. Cash deposits of nil and US$9,917,832 as of September 30, 2017 and December 31, 2016 that are restricted for period beyond 12 months from the balance sheet date are included in other non-current assets in the condensed consolidated balance sheets and also excluded from cash and cash equivalents in the condensed consolidated statements of cash flows.
Short-term bank deposits that are pledged as collateral for bills payable relating to purchases of raw materials are reported as restricted cash and amounted to US$48,305,685 and US$33,673,057 as of September 30, 2017 and December 31, 2016, respectively. Upon maturity and repayment of the bills payable, which is generally within 6 months, the cash becomes available for use by the Company. The cash flows from the pledged bank deposits, which relate to purchases of raw materials, are reported within cash flows from operating activities in the condensed consolidated statements of cash flows.
Short-term bank deposits that are pledged as collateral for short-term and long-term bank borrowings are reported as restricted cash and amounted to US$87,962,754 and US$69,816,345 as of September 30, 2017 and December 31, 2016, respectively. Long-term bank deposits that are pledged as collateral for issuance of letter of guarantee are reported as other non-current assets and amounted to nil and US$9,917,832 as of September 30, 2017 and December 31, 2016, respectively. The cash flows from such bank deposits are reported within cash flows from financing activities in the condensed consolidated statements of cash flows.
Short-term bank deposits that are related to government grant are reported as restricted cash and amounted to US$1,512,665 and nil as of September 30, 2017 and December 31, 2016, respectively. On February 11, 2017, the Company entered into a fund support agreement with the People's Government of Shunqing District, Nanchong City, Sichuan Province, pursuant to which the Company was granted RMB10 million (equivalent to US$1.5 million) to support the construction of the Sichuan plant. Such amount has been received in full in the Company’s bank account with reimbursement be subject to the Government’s preapproval and will be released by the Government when the construction progress of the plant is 60%. Such balance is reported as restricted cash.
Short-term bank deposits that are pledged as collateral for foreign currency option contract are reported as restricted cash and amounted to US$2,772,378 and nil as of September 30, 2017 and December 31, 2016, respectively. The cash flows from such bank deposits are reported within operating activities in the condensed consolidated statements of cash flows.
Note 2 - Accounts receivable
Accounts receivable consists of the following:
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
Accounts receivable
|
|
|
139,971,988
|
|
|
|
410,087,666
|
|
Allowance for doubtful accounts
|
|
|
(39,830
|
)
|
|
|
(38,107
|
)
|
Accounts receivable, net
|
|
|
139,932,158
|
|
|
|
410,049,559
|
|
As of September 30, 2017 and December 31, 2016, the accounts receivable balances also include notes receivable in the amount of US$253,258 and US$374,296, respectively. As of September 30, 2017 and December 31, 2016, US$97,983,300 and
US$63,301,966
of accounts receivable are pledged for the short-term bank loans, respectively.
There was no accrual of additional provision or write-off of accounts receivable for the three-month and nine-month periods ended September 30, 2017 and 2016.
The following table provides an analysis of the aging of accounts receivable as of September 30, 2017 and December 31, 2016:
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
US$
|
|
|
US$
|
|
Aging:
|
|
|
|
|
|
|
– current
|
|
|
93,655,150
|
|
|
|
373,108,359
|
|
– 1-3 months past due
|
|
|
34,281,278
|
|
|
|
36,941,200
|
|
– 4-6 months past due
|
|
|
4,393,947
|
|
|
|
-
|
|
– 7-12 months past due
|
|
|
7,601,783
|
|
|
|
-
|
|
– greater than one year past due
|
|
|
39,830
|
|
|
|
38,107
|
|
Total accounts receivable
|
|
|
139,971,988
|
|
|
|
410,087,666
|
|
Note 3 - Inventories
Inventories consist of the following:
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
US$
|
|
US$
|
|
|
|
|
|
|
Raw materials
|
|
|
315,665,762
|
|
|
|
270,605,823
|
|
Work in progress
|
|
|
54,517
|
|
|
|
157,953
|
|
Finished goods
|
|
|
93,018,062
|
|
|
|
10,175,232
|
|
Total inventories
|
|
|
408,738,341
|
|
|
|
280,939,008
|
|
There were no write down of inventories for the three-month and nine-month periods ended September 30, 2017 and 2016.
Note 4 – Prepaid expenses and other current assets
Prepaid expenses and other current assets consist of the following:
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
Receivables from Hailezi (i)
|
|
|
256,892,209
|
|
|
|
88,286,651
|
|
Receivables from Jiamu (ii)
|
|
|
-
|
|
|
|
20,628,987
|
|
Advances to suppliers
|
|
|
45,330,431
|
|
|
|
3,365,930
|
|
Value added taxes receivable (iii)
|
|
|
8,083,669
|
|
|
|
4,814,920
|
|
Interest receivable (iv)
|
|
|
2,465,875
|
|
|
|
3,231,763
|
|
Others (v)
|
|
|
4,670,137
|
|
|
|
4,982,058
|
|
Total prepaid expenses and other current assets
|
|
|
317,442,321
|
|
|
|
125,310,309
|
|
(i) In
September 2016, the Company's two subsidiaries, Heilongjiang Xinda Enterprise Group Company Limited ("HLJ Xinda Group") and Sichuan Xinda Enterprise Group Co., Ltd ("Sichuan Xinda") each entered into equipment purchase contracts with Harbin Hailezi Science and Technology Co., Ltd. ("Hailezi") to purchase production equipment, testing equipment and storage facility. Pursuant to the contracts with Hailezi, HLJ Xinda Group and Sichuan Xinda have prepaid RMB612.5 million (equivalent to US$88.3 million) as of December 31, 2016, which was recognized in investing activities in the statements of cash flows. In November 2016, the three parties agreed to terminate the contracts and Hailezi agreed to refund all the prepayment. As of September 30, 2017, Hailezi has refunded the abovementioned prepayment to HLJ Xinda Group and Sichuan Xinda.
In March 2017, Sichuan Xinda signed a series of contracts with Hailezi to purchase production equipment, and prepaid RMB1,728.9 million (equivalent to US$260.5 million ) to Hailezi, which was recognized in investing activities in the statements of cash flows. In June 2017, the two parties agreed to partially terminate the contracts and Hailezi agreed to refund the prepayment amounting to RMB1,704.9 million (equivalent to US$256.9 million) by the end of March 2018. For details, please refer to Note 6.
(ii) Sichuan Xinda prepaid RMB143.1 million (equivalent to US$20.6 million) to purchase equipment from Harbin Jiamu Import and Export Co., Ltd. in November 2016. As Harbin Jiamu Import and Export Co., Ltd. had cancelled its registration and transferred its business to Harbin Jiamu Science and Technology Co., Ltd., Harbin Jiamu Import and Export Co., Ltd. agreed to refund the prepayment. As of
September
30, 2017, Harbin Jiamu Import and Export Co., Ltd. has refunded all the prepayment. The prepayments and refund were recognized in operating activities in the statements of cash flows.
The majority owner of Hailezi is also the majority owner of Harbin Jiamu Import and Export Co., Ltd and Harbin Jiamu Science
and Technology Co., Ltd. (collectedly "Jiamu"), which is one of the major equipment distributors.
(iii) Value added taxes receivables mainly represent the input taxes on purchasing equipment by Sichuan Xinda, which are to be net off with output taxes. Value added taxes receivables were recognized in operating activities in condensed consolidated statements of cash flows.
(iv) Interest receivable mainly represents interest income accrued from time deposits and restricted cash.
(v) Others mainly include prepaid miscellaneous service fee, staff advance and prepaid rental fee.
Note 5 – Property, plant and equipment, net
Property, plant and equipment consist of the following:
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
Machinery, equipment and furniture
|
|
|
407,915,827
|
|
|
|
391,149,907
|
|
Motor vehicles
|
|
|
2,797,973
|
|
|
|
2,640,477
|
|
Workshops and buildings
|
|
|
144,816,614
|
|
|
|
119,503,091
|
|
Construction in progress
|
|
|
430,033,881
|
|
|
|
409,257,584
|
|
Total property, plant and equipment
|
|
|
985,564,295
|
|
|
|
922,551,059
|
|
Less accumulated depreciation
|
|
|
(153,399,640
|
)
|
|
|
(116,187,367
|
)
|
Property, plant and equipment, net
|
|
|
832,164,655
|
|
|
|
806,363,692
|
|
For the three-month and nine-month periods ended September 30, 2017 and 2016, the Company capitalized US$704,165 and US$627,819, and US$2,073,132and US$1,854,251 of interest costs as a component of the cost of construction in progress, respectively. Depreciation expense on property, plant and equipment was allocated to the following expense items:
|
|
Three-Month Period Ended
September 30,
|
|
|
2017
|
|
2016
|
|
|
US$
|
|
US$
|
|
|
|
|
|
|
Cost of revenues
|
|
|
9,022,402
|
|
|
|
8,181,737
|
|
General and administrative expenses
|
|
|
733,090
|
|
|
|
487,639
|
|
Research and development expenses
|
|
|
1,031,697
|
|
|
|
923,963
|
|
Selling expense
|
|
|
958
|
|
|
|
815
|
|
Total depreciation expense
|
|
|
10,788,147
|
|
|
|
9,594,154
|
|
|
|
Nine-Month Period Ended
September 30,
|
|
|
|
2017
|
|
2016
|
|
|
|
US$
|
|
US$
|
|
|
|
|
|
|
Cost of revenues
|
|
|
26,657,211
|
|
|
|
19,543,468
|
|
General and administrative expenses
|
|
|
1,938,938
|
|
|
|
1,325,965
|
|
Research and development expenses
|
|
|
3,021,553
|
|
|
|
2,812,167
|
|
Selling expense
|
|
|
2,599
|
|
|
|
1,705
|
|
Total depreciation expense
|
|
|
31,620,301
|
|
|
|
23,683,305
|
|
Note 6 - Prepayments to equipment and construction suppliers
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
US$
|
|
|
US$
|
|
Hailezi (i)
|
|
|
41,648,013
|
|
|
|
-
|
|
Beijin Construction (ii)
|
|
|
14,712,547
|
|
|
|
4,324,636
|
|
Samim Group FZE (iii)
|
|
|
-
|
|
|
|
5,308,737
|
|
Peaceful (iv)
|
|
|
5,105,320
|
|
|
|
-
|
|
Sichuan Construction
|
|
|
753,228
|
|
|
|
907,024
|
|
Sports City (v)
|
|
|
-
|
|
|
|
2,859,952
|
|
Others
|
|
|
422,796
|
|
|
|
767,353
|
|
Total Prepayments to equipment and construction suppliers
|
|
|
62,641,904
|
|
|
|
14,167,702
|
|
(i)
|
On September 26, 2016 and February 28, 2017, HLJ Xinda Group entered into two equipment purchase contracts with Hailezi for a total consideration of RMB782.2 million (equivalent to US$117.9 million) to purchase storage facility and other equipment, which will be used for upgrading the storage system of warehouse located in Harbin, China. Pursuant to the contract with Hailezi, HLJ Xinda Group has prepaid RMB621.6 million (equivalent to US$93.7 million) as of September 30, 2017. Due to a redesign of outdoor storage facility in June 2017,
HLJ Xinda Group
entered into a supplementary agreement with Hailezi, which decreased the original contracts amounts to RMB283.7 million (equivalent to US$42.7 million). Hailezi refunded RMB369.1 million (equivalent to US$55.6 million) to
HLJ Xinda Group
on June 22, 2017. The prepayment and refund were recognized in investing activities in the statements of cash flows
.
On March 17, 2017, Sichuan Xinda entered into a definitive agreement with the People's Government of Shunqing District, Nanchong City of Sichuan Province for the production of 300,000 metric tons of bio-composite materials and additive manufacturing and 20,000 metric tons of functional masterbatch, a high-end color additive process in plastics manufacturing ("the Nanchong Project"). The Nanchong Project will be located in a land area of 250 mu (equivalent to 41.2 acres), with 215 mu designated for bio-composite materials and additive manufacturing production and 35 mu to be designated for functional masterbatch production. The projected total capital expenditures for the project is approximately RMB2.5 billion (estimated to be US$376.7 million) with anticipated completion by the end of December 2018.
In connection with the Nanchong Project, Sichuan Xinda entered into equipment purchase contracts with Hailezi to purchase production equipment and testing equipment. Pursuant to the contracts with Hailezi, Sichuan Xinda has prepaid RMB1,728.9 million (equivalent to US$260.5 million) as of September 30, 2017. By the end of June 2017, in order to ensure the traceability of the product and management of supply chain, Sichuan Xinda expected to launch an integrated ERP system, which resulted in the equipment to be purchased under the original contracts with Hailezi not meeting the production requirements. Hailezi agreed to refund the prepayment in the amount of RMB1,704.9 million (equivalent to US$256.9 million) by the end of March 2018 and that part of prepayment has been reclassified as prepaid expenses and other current assets as of September 30, 2017.
|
(ii)
|
Since November 15, 2016, Sichuan Xinda entered into decoration contracts with Sichuan Beijin Construction Engineering Company Limited ("Beijin Construction") to perform indoor and outdoor decoration work for a consideration of RMB264.3 million (equivalent to US$39.8 million). Pursuant to the contract with Beijin Construction, Sichuan Xinda has prepaid RMB117.3 million (equivalent to US$17.6 million) as of September 30, 2017, in which RMB18.4 million (equivalent to US$2.9 million) was transferred to construction in progress. The prepayment was recognized in investing activities in the statements of cash flows.
|
(iii)
|
On September 21, 2016, AL Composites Materials FZE ("Dubai Xinda")
entered into a purchase contract with
Samim Group FZE pertaining approximately 22,324 square meters property in JAFZA in Dubai, UAE with constructed building including a warehouse, office and service block for a total consideration of AED55.3 million (equivalent to US$15.0 million). As of September 30, 2017, the Company has prepaid the full amount of the contract, which was recognized in investing activities in the statements of cash flow. As of September 30 2017, the building has been delivered, and the amount has been transferred to property, plant and equipment.
|
(iv)
|
On October 20, 2016, Sichuan Xinda entered into an equipment purchase contract with Peaceful Treasure Limited ("Peaceful") for a total consideration of US$13.5 million to purchase certain production and testing equipment. Pursuant to the contract with Peaceful, the Company prepaid RMB33.9 million (equivalent to US$5.1 million) as of September 30, 2017, which was recognized in investing activities in the statements of cash flows.
|
(v)
|
In September 2016, Dubai Xinda entered into apartments purchase contracts with Dubai Sports City LLC ("Sports City") for a total consideration of AED14.0 million (equivalent to US$3.8 million), which was recognized in investing activities in the statements of cash flows. As of September 30, 2017, the apartments have been occupied by the Company, and the amount has been transferred to property, plant and equipment.
|
Note 7 -Foreign currency option contracts
On February 24, 2017, the Company entered into two foreign currency option contracts with Bank of China ("BOC"), Harbin Branch, pursuant to which the Company and BOC both have different options to excise the foreign currency contracts depending on the future currency fluctuation, and the nominal values are US$5.0 million and US$10.0 million respectively, with the defined exchange rates for settlement on March 15, 2018. Changes in fair value of the above foreign currency options amounted to US$0.2 million and US$0.4 million, respectively, from the date of its inception to September 30, 2017 and were recognized in earnings because they did not qualify or was designated for hedge accounting.
Note 8 – Borrowings
The Company has credit facilities with several banks under which they draw short-term and long-term bank loans as described below.
(a) Current
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
US$
|
|
|
US$
|
|
Unsecured loans
|
|
|
373,668,429
|
|
|
|
273,147,455
|
|
Loans secured by accounts receivable
|
|
|
67,802,739
|
|
|
|
50,454,086
|
|
Loans secured by restricted cash
|
|
|
55,000,000
|
|
|
|
32,474,300
|
|
Current portion of long-term bank loans (note b)
|
|
|
230,618,448
|
|
|
|
88,681,635
|
|
Total short-term loans, including current portion of long-term bank loans
|
|
|
727,089,616
|
|
|
|
444,757,476
|
|
As of September 30, 2017 and December 31, 2016, the Company's short-term bank loans (including the current portion of long-term bank loans) bear a weighted average interest rate of 4.0% and 4.0% per annum, respectively. All short-term bank loans mature at various times within one year.
In January 2016, the Company obtained a one-year secured loan of US$16.6 million from HSBC Middle East at an annual interest rate of one-month LIBOR (1.2350% as of September 30, 2017) plus 1.8%. This loan was secured by restricted cash of RMB25.5 million (equivalent to US$3.8 million) in the HSBC Bank in Harbin, China. The company repaid the loan on January 23, 2017.
In August 2016, the Company obtained ten six-month secured loans in a total amount of RMB350 million (equivalent to US$52.7 million) by accounts receivables of RMB439.2 million (equivalent to US$66.2 million) at an annual interest rate of 4.350% from Harbin Longjiang Bank. The Company repaid the loans in January 2017 and obtained another twenty nine secured loans in a total amount of RMB800 million (equivalent to US$120.5 million) by accounts receivables of RMB1,096.6 million (equivalent to US$165.2 million) at an annual interest rate of 4.350%. The Company repaid ten loans in total RMB350 million (equivalent to US$52.7 million) between June 2017 to September 2017, and retrieved accounts receivables of RMB446.3 million (equivalent to US$67.2 million).
In August 2016, the Company obtained a one-year secured loan of US$13.9 million from Industrial and Commercial Bank of China (Abu Dhabi Branch) at an interest of three-month LIBOR (1.3328% as of September 30, 2017) plus 2.0%. This loan was secured by restricted cash of RMB100.0 million (equivalent to US$15.1 million) in the Industrial and Commercial Bank of China in Harbin, China. The interest rate is reset every three months. The company repaid the loan in August, 2017.
On October 7, 2016, the Company obtained a one-year secured loan of US$2.0 million from Bank of China (Macau Branch) at an annual interest rate of 1.8%. The loan was secured by restricted cash of RMB15.0 million (equivalent to US$2.3 million) in Bank of China in Harbin, China. The Company repaid the loan in September 2017 in advance, with the restricted cash remained restricted until October 2017.
In January 2017, the Company obtained a one-year secured loan of US$12.0 million from HSBC Middle East at an annual interest rate of one-month LIBOR (1.2350% as of September 30, 2017) plus 1.8%. This loan was secured by restricted cash of RMB18.5 million (equivalent to US$2.8 million) in the HSBC Bank in Harbin, China.
In January, 2017, the Company obtained a one-year secured loan of US$12.0 million from Bank of China (Macau Branch) at an annual interest rate of 2.3%. The loan was secured by restricted cash of RMB94.0 million (equivalent to US$14.1 million) in Bank of China in Harbin, China.
In February, 2017, the Company obtained a one-year secured loan of US$17.0 million from Bank of China (Abu Dhabi Branch) at an annual interest rate of 2.3%. The loan was secured by restricted cash of RMB136.0 million (equivalent to US$20.5 million) in Bank of China in Harbin, China.
In July, 2017, the Company obtained a one-year secured loan of US$14.0 million from Bank of China (Macau Branch) at an annual interest rate of 2.5%. The loan was secured by restricted cash of RMB107.0 million (equivalent to US$16.1 million) in Bank of China in Harbin, China.
(b) Non-current
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
US$
|
|
|
US$
|
|
Secured loans
|
|
|
44,170,000
|
|
|
|
90,170,000
|
|
|
|
|
|
|
|
|
|
|
Unsecured loans
|
|
|
121,291,567
|
|
|
|
73,518,812
|
|
|
|
|
|
|
|
|
|
|
Syndicate loan facility
|
|
|
176,654,719
|
|
|
|
174,513,438
|
|
Less: current portion
|
|
|
230,618,448
|
|
|
|
88,681,635
|
|
Total long-term bank loans, excluding current portion
|
|
|
111,497,838
|
|
|
|
249,520,615
|
|
On June 12, 2014, the Company obtained a three-year secured loan of US$70 million from Bank of China Paris Branch at interest rate of three-month LIBOR (1.3328% as of September 30, 2017). The loan is secured by restricted cash of RMB110 million (equivalent to US$16.6 million). In accordance with the requirements of the bank, additional RMB109 million (equivalent to US$16.4 million) is pledged as restricted cash for this long-term bank loan on July 22, 2016. The Company repaid US$4 million in 2015, US$5 million on June 9, 2016, US$15 million on December 9, 2016, and US$46 million on June 9, 2017.
On January 23, 2015, the Company obtained two two-year unsecured loans in the total amount of RMB100 million (equivalent to US$15.1 million) from Agriculture Bank of China at an annual interest rate of 6.0%. Both loans were due and repaid by the Company in January 2017.
On April 22, 2015, the Company obtained a two-year unsecured loan of RMB40 million (equivalent to US$6.0 million) from Agriculture Bank of China at an annual interest rate of 5.75%. The Company repaid the loan on April 20, 2017.
In October and November, 2015, the Company obtained three long term unsecured loans of RMB260 million (equivalent to US$39.1 million) from Bank of China at an annual interest rate of 4.75%. In January 2016, the Company obtained a long term unsecured loan of RMB80 million (equivalent to US$12.1 million) from Bank of China at an annual interest rate of 4.75%. On December 9, 2016, the Company obtained a long term unsecured loan of RMB30 million (equivalent to US$4.5 million) from Bank of China at an annual interest rate of 4.75%. On March 23, 2017, the Company obtained a long term unsecured loan of RMB25.0 million (equivalent to US$3.8 million) from Bank of China at an annual interest rate of 4.75%. The Company repaid RMB10 million (equivalent to US$1.5 million) on April 28, 2017. RMB40 million (equivalent to US$6.0 million), RMB25 million (equivalent to US$3.8 million), RMB100 million (equivalent to US$15.1 million), RMB25 million (equivalent to US$3.8 million), RMB100 million (equivalent to US$15.1 million), RMB20 million (equivalent to US$3.0 million), and RMB75 million (equivalent to US$11.2 million) will be repaid on October 28, 2017, April 28, 2018, October 28, 2018, April 28, 2019, October 28, 2019, April 28, 2020 and October 28, 2020, respectively.
On May 13, 2016, the Company obtained two two-year secured loans of US$14.3 million from China Construction Bank (Dubai) at an interest of three-month LIBOR (1.3328% as of September 30, 2017) plus 1.6%. On May 17, 2016, the Company obtained two two-year secured loans of US$12.3 million from China Construction Bank (Dubai) at an interest of three-month LIBOR (1.3328% as of September 30, 2017) plus 1.6%. On May 22, 2016, the Company obtained a two-year secured loan of US$3.8 million from China Construction Bank (Dubai) at an interest of three-month LIBOR (1.3328% as of September 30, 2017) plus 1.6%. The interest rate is reset every three months. These loans are secured by restricted cash of RMB68.8 million (equivalent to US$10.3 million). All of these loans will be due on March 22, 2018.
On August 22, 2016, Xinda Holding (HK) Company Limited ("Xinda Holding (HK)") a wholly owned subsidiary of the Company, entered into a facility agreement for a loan facility in an aggregate amount of US$180 million with a consortium of banks and financial institutions led by Standard Chartered Bank (Hong Kong) Limited. The Company paid arrangement fees and legal fees in the amount of US$6.77 million of which the unamortized balance is US$3.3 million as of September 30, 2017 for the related loan. Debt issuance costs are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the loan and amortized to interest expense using the effective interest rate of 5.935% as of September 30, 2017. US$22.5 million, US$22.5 million, US$45.0 million and US$90.0 million of the principal amount will be repaid on November 22, 2017, February 22, 2018, May 22, 2018 and August 22, 2018, respectively.
On November 7, 2016, the Company obtained a fifteen-month secured loan of US$3.3 million from Industrial and Commercial Bank of China (Abu Dhabi Branch) at an annual interest rate of 2.2%. The loan is secured by restricted cash of RMB25 million (equivalent to US$3.8 million). The loan will be due on February 7, 2018.
On November 30, 2016, the Company obtained a fifteen-month secured loan of US$10.5 million from Industrial and Commercial Bank of China (Abu Dhabi Branch) at an annual interest rate of 2.2%. The loan is secured by restricted cash of RMB80 million (equivalent to US$12.1 million). The loan will be due on February 28, 2018.
In January 2017, the Company obtained three short-term unsecured loans of RMB420 million (equivalent to US$63.3 million) from Nanchong Shuntou Development Group Co., Ltd. at an annual interest rate of 4.35%. In accordance with the renewal agreements in June 2017, the repayment terms were extended and the loans will be due on December 31, 2018.
As of September 30, 2017, the Company had total lines of credit of RMB6,806.8 million (US$1,025.6 million) including unused lines of credit of RMB2,398.6 million (US$361.4 million) with remaining terms less than 12 months and RMB5.0 million (US$0.8 million) with remaining terms beyond 12 months.
Certain lines of credit contain financial covenants such as total stockholders' equity, debt asset ratio, contingent liability ratio and net profit. As of September 30, 2017, the Company has met these financial covenants.
Maturities on long-term bank loans (including current portion) are as follows:
|
|
September 30, 2017
|
|
|
|
US$
|
|
2017
|
|
|
28,526,910
|
|
2018
|
|
|
280,441,370
|
|
2019
|
|
|
18,834,094
|
|
2020
|
|
|
14,313,912
|
|
after 2020
|
|
|
-
|
|
Total
|
|
|
342,116,286
|
|
Note 9 - Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consist of the following:
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
US$
|
|
|
US$
|
|
Payables for purchase of property, plant and equipment
|
|
|
100,460,840
|
|
|
|
98,472,641
|
|
Accrued freight expenses
|
|
|
7,724,318
|
|
|
|
7,972,067
|
|
Accrued interest expenses
|
|
|
4,570,645
|
|
|
|
885,290
|
|
Advance from customers (i)
|
|
|
94,929,456
|
|
|
|
93,066
|
|
Non income tax payables
|
|
|
4,070,887
|
|
|
|
4,499,161
|
|
Others (ii)
|
|
|
12,574,427
|
|
|
|
7,417,141
|
|
Total accrued expenses and other current liabilities
|
|
|
224,330,573
|
|
|
|
119,339,366
|
|
(i) Advance from customers mainly represents the advance received from four customers in the PRC for the raw material purchases during the nine-month period ended September 30, 2017.
(ii) Others mainly represent accrued payroll and employee benefits, accrued audit and consulting fees, electricity fee and other accrued miscellaneous operating expenses.
Note 10 – Related party transactions
The Company entered into related party transactions with Harbin Xinda High-Tech Co., Ltd. ("Xinda High-Tech"), an entity controlled by the wife of Mr. Han, the chief executive officer and controlling stockholder of the Company, and Mr. Han's son. The significant related party transactions are summarized as follows:
|
Three-Month Period Ended September 30,
|
|
Nine-Month Period Ended September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
Costs and expenses resulting from transactions with related parties:
|
|
|
|
|
|
|
|
|
Rental expenses for plant and office spaces
|
|
|
160,886
|
|
|
|
179,962
|
|
|
|
428,253
|
|
|
|
549,023
|
|
The related party balances are summarized as follows:
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
US$
|
|
US$
|
|
Amounts due from a related party:
|
|
|
|
|
Prepaid rent expenses to Xinda High-Tech
|
|
|
-
|
|
|
|
229,624
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
US$
|
|
|
US$
|
|
Amounts due to related parties
|
|
|
|
|
|
|
|
|
Rental payable to Xinda High-Tech
|
|
|
270,278
|
|
|
|
-
|
|
Rental payable to Mr Han's son
|
|
|
12,070
|
|
|
|
11,548
|
|
Total
|
|
|
282,348
|
|
|
|
11,548
|
|
The Company rents the following plant and office buildings in Harbin, Heilongjiang Province from Xinda High-Tech:
Premise Leased
|
Area (M
2
)
|
|
Annual Rental Fee (US$)
|
|
Period of Lease
|
Office building
|
|
|
23,894
|
|
|
|
702,503
|
|
Between January 1, 2014 and December 31, 2018
|
The Company rented the following facilities in Harbin, Heilongjiang Province from Mr. Han's son:
Premise Leased
|
|
Area (M
2
)
|
|
|
Annual Rental Fee (US$)
|
|
Period of Lease
|
Facility
|
|
|
200
|
|
|
|
5,880
|
|
Between August 17, 2014 and August 16, 2016
|
Note 11– Income tax
Pursuant to an approval from the local tax authority in July 2013, Sichuan Xinda, a subsidiary of China XD, became a qualified enterprise located in the western region of the PRC, which entitled it to a preferential income tax rate of 15% from January 1, 2013 to December 31, 2020. Under the current laws of Dubai, Dubai Xinda, a subsidiary of China XD, is exempted from income taxes.
The effective income tax rates for the nine-month periods ended September 30, 2017 and 2016 were 17.1% and 18.9%, respectively. The effective income tax rate reduced from 18.9% for the nine-month period ended September 30, 2016 to 17.1% for the nine-month period ended September 30, 2017, primarily due to a greater portion of the profit generated by Sichuan Xinda which enjoys preferential tax rate and the increase of 50% additional deduction of R&D expense. The effective income tax rate for the nine-month period ended September 30, 2017 differs from the PRC statutory income tax rate of 25% primarily due to Sichuan Xinda's preferential income tax rate and R&D 50% additional deduction of the major PRC operating entities.
As of September 30, 2017, the unrecognized tax benefits were US$30,901,693 and the interest relating to unrecognized tax benefits was US$9,023,166, of which the unrecognized tax benefits in 2012 amounting to US$2,889,439 and related accrued interest amounting to US$2,265,320 was classified as current liabilities as the five-year tax assessment period will expire on May 31, 2018. No penalties expense related to unrecognized tax benefits were recorded. The Company is currently unable to provide an estimate of a range of the total amount of unrecognized tax benefits that is reasonably possible to change significantly within the next twelve months.
Note 12 – Deferred Income
On January 26, 2015, the Company entered into a memorandum and a fund support agreement (the "Agreement") with the People's Government of Shunqing District, Nanchong City, Sichuan Province ("Shunqing Government") pursuant to which Shunqing Government, through its investment vehicle, extended to the Company RMB350 million (equivalent to US$52.7 million) to support the construction of the Sichuan plant, which has been received in full in the form of government repayment of bank loans on behalf of the Company.
In addition, the Company has received RMB159.8 million (equivalent to US$24.1 million) from Shunqing Government and RMB6.4 million (equivalent to US$1.0 million) from Ministry of Finance of the People's Republic of China to support the construction and RMB2.2 million (equivalent to US$0.3 million) special funds of ministerial key research projects from Ministry of Science and Technology of PRC as of September 30, 2017.
Since the funding is related to construction of long-term assets, the amounts were recognized as government grant, which is included in deferred income on the condensed consolidated balance sheets, and to be recognized as other income in the condensed consolidated statements of comprehensive income over the periods and in the proportions in which depreciation expense on the long-term assets is recognized.
The Sichuan factory has been operational since July 2016. A cumulative RMB32.3 million (equivalent to US$4.9 million) government grants have been amortized as other income proportionate to the depreciation of the related assets, of which RMB22.8 million (equivalent to US$3.4 million) was amortized in the nine-month period ended September 30, 2017.
The Company also received RMB36 million (equivalent to US$5.4 million) from Shunqing Government with respect to interest subsidy for future bank loan. A cumulative RMB16.4 million (equivalent to US$2.4 million) government grants have been amortized as other income in line with the amount of related loan interest paid, of which RMB1.4 million (equivalent to US$0.2 million) was amortized in the nine-month period ended September 30, 2017.
Note 13 – Other non-current liabilities
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
US$
|
|
US$
|
|
|
|
|
|
|
Income tax payable-noncurrent (i)
|
|
|
34,770,100
|
|
|
|
31,602,314
|
|
Deferred income tax liabilities
|
|
|
9,700,179
|
|
|
|
10,818,305
|
|
Total other non-current liabilities
|
|
|
44,470,279
|
|
|
|
42,420,619
|
|
(i) Income tax payable-noncurrent represents the cumulative balance of unrecognized tax benefits since 2013 and related accrued interest. As the five-year tax assessment period for unrecognized tax benefits occurred in 2012 will expire on May 31, 2018, the unrecognized tax benefits occurred in 2012 and related accrued interest amounting to RMB19.2 million (equivalent to US$2.9 million) and RMB15.0 million (equivalent to US$2.3 million), respectively, were classified as current liabilities.
Note 14 – Stockholders' equity
The changes of each caption of stockholders' equity for the nine-month period ended September 30, 2017 are as follows:
|
|
Series B Preferred Stock
|
|
Common Stock
|
|
|
|
Additional
|
|
|
|
Accumulated
Other
|
|
Total
|
|
|
|
Number
of Shares
|
|
Amount
|
|
Number
of Shares
|
|
Amount
|
|
Treasury Stock
|
|
Paid-in
Capital
|
|
Retained
Earnings
|
|
Comprehensive
Income
|
|
Stockholders'
Equity
|
|
|
|
|
|
US$
|
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2017
|
|
|
1,000,000
|
|
|
100
|
|
|
49,511,541
|
|
|
4,952
|
|
|
(92,694
|
)
|
|
82,606,404
|
|
|
617,168,735
|
|
|
(65,427,831
|
)
|
|
634,259,666
|
|
Net income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
52,101,439
|
|
|
-
|
|
|
52,101,439
|
|
Other comprehensive income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
33,557,087
|
|
|
33,557,087
|
|
Stock based compensation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
468,936
|
|
|
-
|
|
|
-
|
|
|
468,936
|
|
Vesting of nonvested shares
|
|
|
-
|
|
|
-
|
|
|
216,190
|
|
|
22
|
|
|
-
|
|
|
(22
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Balance as of September 30, 2017
|
|
|
1,000,000
|
|
|
100
|
|
|
49,727,731
|
|
|
4,974
|
|
|
(92,694
|
)
|
|
83,075,318
|
|
|
669,270,174
|
|
|
(31,870,744
|
)
|
|
720,387,128
|
|
Note 15 – Stock based compensation
Nonvested shares
A summary of the nonvested shares activity for the nine-month period ended September 30, 2017 is as follows:
|
|
Number of Nonvested
Shares
|
|
|
Weighted Average
Grant date Fair Value
|
|
|
|
|
|
|
US$
|
|
Outstanding as of December 31, 2016
|
|
|
402,210
|
|
|
|
6.10
|
|
Vested
|
|
|
(216,190
|
)
|
|
|
5.12
|
|
Forfeited
|
|
|
(24,910
|
)
|
|
|
5.60
|
|
Outstanding as of September 30, 2017
|
|
|
161,110
|
|
|
|
7.48
|
|
The Company recognized US$121,890 and US$195,536 of share-based compensation expense in general and administration expenses relating to nonvested shares for the three-month periods ended September 30, 2017 and 2016, respectively, and US$468,936 and US$665,962 of share-based compensation expense in general and administration expenses relating to nonvested shares for the nine-month periods ended September 30, 2017 and 2016, respectively. As of September 30, 2017, there was US$280,811 total unrecognized compensation cost relating to nonvested shares, which is to be recognized over a weighted average period of 0.85 years.
Note 16 - Earnings per share
Basic and diluted earnings per share are calculated as follows:
|
|
Three-Month Period Ended September 30,
|
|
|
Nine-Month Period Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
Net income
|
|
|
14,1
36
,
458
|
|
|
|
20,176,806
|
|
|
|
52,
101
,
439
|
|
|
|
64,889,931
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings allocated to participating Series D convertible preferred stock
|
|
|
(3,4
32
,6
80
|
)
|
|
|
(4,895,398
|
)
|
|
|
(12,
651
,9
4
5
|
)
|
|
|
(15,736,883
|
)
|
Earnings allocated to participating nonvested shares
|
|
|
(5
3
,
723
|
)
|
|
|
(137,471
|
)
|
|
|
(26
3
,
972
|
)
|
|
|
(539,108
|
)
|
Net income for basic and diluted earnings per share
|
|
|
1
0
,
650
,
055
|
|
|
|
15,143,937
|
|
|
|
39,
18
5,
522
|
|
|
|
48,613,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic and diluted earnings per share
|
|
|
49,640,785
|
|
|
|
49,496,074
|
|
|
|
49,555,096
|
|
|
|
49,426,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
0.2
1
|
|
|
|
0.31
|
|
|
|
0.
79
|
|
|
|
0.98
|
|
The following table summarizes potentially dilutive securities excluded from the calculation of diluted earnings per share for the three-month periods and nine-month periods ended September 30, 2017 and 2016 because their effects are anti-dilutive:
|
Three-Month Period Ended September 30,
|
|
Nine-Month Period Ended September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Shares issuable upon conversion of Series D convertible preferred stock
|
|
|
16,000,000
|
|
|
|
16,000,000
|
|
|
|
16,000,000
|
|
|
|
16,000,000
|
|
Note 17 - Commitments and contingencies
(1) Lease commitments
Future minimum lease payments under non-cancellable operating leases agreements as of September 30, 2017 were as follows.
|
|
US$
|
|
Period from October 1, 2017 to December 31, 2017
|
|
|
381,096
|
|
Years ending December 31,
|
|
|
|
|
2018
|
|
|
1,081,624
|
|
2019
|
|
|
222,638
|
|
2020
|
|
|
131,043
|
|
2021
|
|
|
65,617
|
|
2022 and thereafter
|
|
|
508,532
|
|
Rental expenses incurred for operating leases of plant and office spaces were US$640,731 and US$667,375 for the three-month periods ended September 30, 2017 and 2016, respectively, and US$1,909,315 and US$1,511,433 for the nine-month periods ended September 30, 2017 and 2016, respectively. There are no step rent provisions, escalation clauses, capital improvement funding requirements, other lease concessions or contingent rent in the lease agreements. The Company has no legal or contractual asset retirement obligations at the end of leases. The Company's leases do not contain any contingent rent payments terms.
(2) Sichuan plant construction and equipment purchase
On March 8, 2013, Xinda Holding (HK) entered into an investment agreement with Shunqing Government, pursuant to which Xinda Holding (HK) will invest RMB1.8 billion in property, plant and equipment and approximately RMB0.6 billion in working capital, for the construction of Sichuan plant. As of September 30, 2017, the Company has a remaining commitment of RMB54.9 million (equivalent to US$8.3 million) mainly for facility construction.
In September 2016, Sichuan Xinda entered into equipment purchase contracts with Hailezi for a consideration of RMB17.0 million (equivalent to US$2.5 million) to purchase storage facility and testing equipment. Afterward, Sichuan Xinda cancelled two contracts with Hailezi for a consideration of RMB1.6 million (equivalent to US$0.2 million). As of September 30, 2017, Sichuan Xinda prepaid RMB6.0 million (equivalent to US$0.9 million) and has a remaining commitment of RMB9.4 million (equivalent to US$1.4 million).
On October 20, 2016, Sichuan Xinda entered into an equipment purchase agreement
purchase contract with Peaceful for a total consideration of RMB89.8 million (equivalent to US$13.5 million) to purchase certain production and testing equipment. As of September 30, 2017, the Company has a commitment of
RMB55.9 million (equivalent to
US$8.4 million).
On November 15, 2016, Sichuan Xinda entered into decoration contract with Beijin Construction to perform indoor and outdoor decoration work for a consideration of RMB237.6 million (equivalent to US$35.8 million). On February 20, 2017, Sichuan Xinda entered into another decoration contract with Beijin Construction to perform outdoor decoration work for a consideration of RMB2.9 million (equivalent to US$0.4 million). On June 10, 2017, Sichuan Xinda entered into another decoration contract with Beijin Construction to perform ground decoration work for a consideration of RMB23.8 million (equivalent to US$3.6 million). As of September 30, 2017, Sichuan Xinda prepaid RMB117.3 million (equivalent to US$17.6 million) of which RMB18.4 million (equivalent to US$2.9 million) was transferred to construction in progress and has a remaining commitment of RMB147.0 million (equivalent to US$22.2 million).
In connection with the Nanchong Project mentioned in Note 6 (i), Sichuan Xinda entered into equipment purchase contracts with Hailezi for a consideration of RMB2,242.8 million (equivalent to US$337.9 million) to purchase production equipment and testing equipment in March 2017. By the end of June 2017, Sichuan Xinda expected to launch an integrated ERP system, which resulted in the equipment to be purchased under the original contracts with Hailezi not meeting the production requirements. Thus the original contracts have been terminated with the amount of RMB2,222.9 million (equivalent to US$334.9 million), and Hailezi agreed to refund the prepayment in the amount of RMB1,704.9 million (equivalent to US$256.9 million) by the end of March 2018, out of the total prepayment made by Sichuan Xinda of RMB1,722.9 million (equivalent to US$259.6 million). As of September 30, 2017, Sichuan Xinda prepaid RMB18.0 million (equivalent to US$2.7 million) and has a remaining commitment of RMB1.9 million (equivalent to US$0.3 million).
(3) Heilongjiang plant construction and equipment purchase
On September 26, 2016 and February 28, 2017, HLJ Xinda Group entered into two equipment purchase contracts with Hailezi for a total consideration of RMB782.2 million (equivalent to US$117.9 million) to purchase storage facility and other equipment. Due to a redesign of outdoor storage facility in June 2017,
HLJ Xinda Group
entered into a supplementary agreement with Hailezi, which decreased the original contracts amounts to RMB283.7 million (equivalent to US$42.7 million). Hailezi refunded RMB369.1 million (equivalent to US$55.6 million) to
HLJ Xinda Group
on June 22, 2017. As of September 30, 2017, HLJ Xinda Group has a remaining commitment of RMB31.2 million (equivalent to US$4.6 million).
On July 21, 2017, Heilongjiang Xinda Enterprise Group Company Limited (“HLJ Xinda Group”) entered into three investment agreements with the Management Committee of Harbin Economic-Technological Development Zone with respect to the industrial project for 300,000 metric tons of biological composite materials, the industrial project for upgrading existing equipment for 100,000 metric tons of engineering plastics and the industrial project for a 3D printing intelligent manufacture demonstration factory and a 3D printing display and experience cloud factory (the "HLJ Project"). Pursuant to three investment agreements, the project total capital expenditure will be RMB4,015 million (equivalent to be US$605.0 million), among which the investment in fixed assets shall be no less than RMB3,295 million (equivalent to US$496.5 million) in total.
(4) Dubai plant construction and equipment
On April 28, 2015, Dubai Xinda entered into a warehouse construction contract with Falcon Red Eye Contracting Co. L.L.C. for a total consideration of AED6.7 million (equivalent to US$1.8 million). As of September 30, 2017, the Company has a remaining commitment of AED2.1 million (equivalent to US$0.6 million).
(5) Xinda Beijing Investment office building decoration
On March 30, 2017, Xinda CI (Beijing) Investment Holding Co., Ltd. ("Xinda Beijing Investment") entered into a decoration contract with Beijing Fangyuan Decoration Engineering Co., Ltd for a total consideration of RMB5.8 million (equivalent to US$0.9 million) to decorate office building. As of September 30, 2017, the decoration work in the amount of RMB1.4 million (equivalent to US$0.2 million) was recorded in construction in progress. As of September 30, 2017, the Company has a remaining commitment of RMB4.4 million (equivalent to US$0.7 million).
On June 9, 2017, Xinda Beijing Investment entered into a decoration contract with Beijing Zhonghongwufang Stone Co., Ltd for a total consideration of RMB1.2 million (equivalent to US$0.2 million) to decorate office building. As of September 30, 2017, the decoration work in the amount of RMB0.6 million (equivalent to US$0.1 million) was recorded in construction in progress. As of September 30, 2017, the Company has a remaining commitment of RMB0.6 million (equivalent to US$0.1 million).
(6) Contingencies
The Company and certain of its officers were named as defendants in two putative securities class action lawsuits filed on July 15, 2014 and July 16, 2014 in the United States District Court for the Southern District of New York. On March 23, 2016, the Court issued an Opinion and Order dismissing the Consolidated Class Action Complaint without prejudice. On May 6, 2016, the lead plaintiffs moved the Court for leave to amend the Consolidated Class Action Complaint. On June 24, 2016, the Company filed its opposition to the lead plaintiffs’ motion. On August 8, 2016, in conjunction with filing the reply brief in support of their motion, the lead plaintiffs moved to strike certain documents referred to in the Company’s opposition. The Company filed its opposition to the lead plaintiffs’ motion to strike on September 16, 2016. On March 8, 2017, the Court entered an Order in the Company’s favor denying the lead plaintiffs’ motion for leave to amend and denying the lead plaintiffs’ motion to strike. The time for the lead plaintiffs to appeal the dismissal of their lawsuits has expired. In accordance with ASC Topic 450, no loss contingency was accrued as of September 30, 2017 since the lawsuit has been dismissed.