UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______
TO ___________
COMMISSION FILE NO. 000-52103
HIGHPOWER INTERNATIONAL, INC.
(Exact Name of Registrant As Specified In
Its Charter)
Delaware |
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20-4062622 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
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Building A1, 68 Xinxia Street, Pinghu, |
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Longgang, Shenzhen, Guangdong |
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People’s Republic of China |
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518111 |
(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including
area code: (86) 755-89686292
SECURITIES REGISTERED PURSUANT TO SECTION 12(b)
OF THE ACT:
Title of |
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Name of each exchange |
Each Class |
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on which registered |
Common Stock, $0.0001 par value |
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Nasdaq Stock Market LLC |
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(Nasdaq Global Market) |
SECURITIES REGISTERED PURSUANT TO SECTION 12(g)
OF THE ACT:
None.
Indicate by check mark
if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ¨ No x
Indicate by check mark
if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ¨ No x
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes x
No ¨
Indicate by checkmark
whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes x
No ¨
Indicate by check mark
if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ¨ No x
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ |
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Accelerated filer ¨ |
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Non-accelerated filer ¨ |
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Smaller reporting company x |
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ¨ No x
The aggregate market value
of the registrant's issued and outstanding shares of common stock held by non-affiliates of the registrant as of June 30, 2014
(based on $4.78 per share, the price at which the registrant’s common stock was last sold on June 30, 2014) was approximately
$42.5 million.
There were 15,084,746 shares outstanding of the registrant’s
common stock, par value $0.0001 per share, as of March 30, 2015. The registrant’s common stock is listed on the Nasdaq Global
Market under the stock symbol “HPJ”.
Documents Incorporated
by Reference: None.
TABLE OF CONTENTS
HIGHPOWER INTERNATIONAL, INC.
TABLE OF CONTENTS TO ANNUAL REPORT ON FORM
10-K
For the Fiscal Year Ended December 31, 2014
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING
STATEMENTS
The information contained in this Form 10-K,
includes some statements that are not purely historical and that are “forward-looking statements.” Such forward-looking
statements include, but are not limited to, statements regarding our company’s and our management’s expectations, hopes,
beliefs, intentions or strategies regarding the future, including our financial condition and results of operations. In addition,
any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any
underlying assumptions, are forward-looking statements. The words “anticipates,” “believes,” “continue,”
“could,” “estimates,” “expects,” “intends,” “may,” “might,”
“plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,”
“should,” “will,” “would” and similar expressions, or the negatives of such terms, may identify
forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in
this Form 10-K are based on current expectations and beliefs concerning future developments and the potential effects on our company.
There can be no assurance that future developments actually affecting us will be those anticipated. These forward-looking statements
involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results
or performance to be materially different from those expressed or implied by these forward-looking statements, including the following:
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A global economic downturn adversely affecting demand for our products; |
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Our reliance on our major customers for a large portion of our net sales; |
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Our reliance on a limited number of suppliers for nickel, our principal raw material; |
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Our ability to develop and market new products; |
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Our ability to establish and maintain a strong brand; |
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Protection of our intellectual property rights; |
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The market acceptance of our products, including our line of Lithium-ion batteries; |
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The implementation of new projects; |
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Our ability to successfully manufacture and deliver our products in the time frame and amounts expected; |
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Exposure to product liability, safety, and defect claims; |
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Exposure to currency exchange risks during our product export; |
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Rising labor costs, volatile metal prices, and inflation; |
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Changes in the laws of the PRC that affect our operations; |
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Our ability to obtain and maintain all necessary government certifications and/or licenses to conduct our business; |
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Development of an active trading market for our securities; |
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The cost of complying with current and future governmental regulations and the impact of any changes in the regulations on our operations; and |
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The other factors referenced in this Form 10-K, including, without limitation, under the sections entitled “Risk Factors,” “Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business.” |
These risks and uncertainties, along with others,
are also described above under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize,
or should our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking
statements. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time
and we cannot predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent
to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required under applicable securities laws.
PART I
ITEM 1. BUSINESS
With respect to this discussion, the terms,
“the Company” “Highpower” “we,” “us,” and “our” refer to Highpower
International, Inc., and its 100%-owned subsidiary Hong Kong Highpower Technology Company Limited (“HKHTC”), HKHTC’s
wholly-owned subsidiaries Shenzhen Highpower Technology Company Limited (“SZ Highpower”), Highpower Energy Technology
(Huizhou)Company Limited (“HZ Highpower”), Icon Energy System Company Limited (“ICON”), SZ Highpower’s
wholly owned subsidiary Huizhou Highpower Technology Company Limited (“HZ HTC”) and its 70%-owned subsidiary Ganzhou
Highpower Technology Company Limited (“GZ Highpower”) and SZ Highpower’s and HKHTC’s jointly owned subsidiary,
Springpower Technology (Shenzhen) Company Limited (“SZ Springpower”). Highpower and its subsidiaries are collectively
referred to as the “Company,” unless the context indicates otherwise.
Corporate Information
Highpower International, Inc. was incorporated
in the state of Delaware on January 3, 2006. HKHTC was incorporated in Hong Kong on July 4, 2003 and organized principally to engage
in the manufacturing and trading of nickel metal hydride rechargeable batteries. All other operating subsidiaries are incorporated
in the People’s Republic of China (“PRC”) and are listed below:
Subsidiary |
Principal Activities |
Shenzhen Highpower Technology Co., Ltd
("SZ Highpower")
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Manufacturing & marketing of batteries |
Springpower Technology (Shenzhen) Co., Ltd
("SZ Springpower")
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Research & manufacturing of batteries |
Ganzhou Highpower Technology Co., Ltd
("GZ Highpower") |
Processing, marketing and research of battery materials |
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Icon Energy System Co., Ltd.
("ICON")
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Research and production of advanced battery packs and systems |
Huizhou Highpower Technology Co., Ltd
("HZ HTC")
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Manufacturing & marketing of batteries |
SZ Highpower manufactures Nickel Metal Hydride
(“Ni-MH”) batteries for both consumer and industrial applications. We have developed significant expertise in Ni-MH
battery technology and large-scale manufacturing that enable us to improve the quality of our battery products, reduce costs, and
keep pace with evolving industry standards. In 2008, we commenced two production lines of Lithium-ion (“Li-ion”) and
Lithium polymer rechargeable batteries at SZ Springpower for consumer applications, such as consumer electronic products, mobile
devices and wireless communication products. In 2013, we completed the automated facility to produce higher volume orders of mobile
device batteries and larger format lithium polymer batteries for electric vehicles, and energy storage systems in Huizhou. Our
automated machinery enables us to enhance uniformity and precision during the manufacturing process.
We employ a broad network of salespersons in
China Mainland and Hong Kong, which targets key customers by arranging in-person sales presentations and providing after-sales
services. The sales staff works directly with our customers to better address their needs.
In 2010, we began establishing a new materials
business in which we intended to recycle and process certain used battery products and raw material scraps collected from the battery
manufacturing industry. This new materials business generates revenue and income and helps us understand our raw material supply
chain, and control our raw material costs and ensure that we have a steady supply of raw materials for battery manufacturing operations
to reduce our reliance on external suppliers. In 2012, we initiated the construction of our Ganzhou recycling plant, which was completed in 2014.
Industry
General
Rapid advancements in electronic technology
have expanded the number of battery-powered devices in recent years. As these devices have come to feature more sophisticated functions,
more compact sizes and lighter weights, the sources of power that operate these products have been required to deliver increasingly
higher levels of energy. This has stimulated consumer demand for higher-energy batteries capable of delivering longer service between
recharges or battery replacement. In contrast to non-rechargeable batteries, after a rechargeable battery is discharged, it can
be recharged and reused up to 1,000 times. Rechargeable batteries generally can be used in many non-rechargeable battery applications,
as well as high energy drain applications such as electric toys, power tools, portable computers and other electronics, medical
devices, and many other consumer products.
High energy density and long achievable cycle
life are important characteristics of rechargeable battery technologies. Energy density refers to the total electrical energy per
unit volume stored in a battery. High energy density batteries generally are longer lasting power sources providing longer operating
time and necessitating fewer battery recharges. Greater energy density will permit the use of batteries of a given weight or volume
for a longer time period. Long cycle life is a preferred feature of a rechargeable battery because it allows the user to charge
and recharge many times before noticing a difference in performance. Long achievable cycle life, particularly in combination with
high energy density, is desirable for applications requiring frequent battery recharges.
The initial technology for rechargeable batteries
was nickel cadmium (“Ni-Cad”). Ni-Cad batteries are offered in a variety of sizes and shapes but suffer from low energy
density and low cycle life. In addition, disposal of Ni-Cad batteries poses serious environmental and liability issues due to the
high toxicity level of cadmium. To meet the demand for higher performing rechargeable batteries, nickel-metal hydride (“Ni-MH”)
batteries were developed. Electrically, Ni-MH batteries are similar to the Ni-Cad counterparts but utilize a hydrogen-absorbing
alloy instead of cadmium. High capacity Ni-MH batteries can replace Ni-Cad batteries in many devices because they operate on the
same voltage and possess similar power and fast charge capabilities, while offering the advantage of greater energy density. In
devices such as power tools, electric toys, personal portable electronic devices and hybrid electric vehicles, Ni-MH batteries
optimize equipment performance. Ni-MH batteries have several advantages including:
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High capacity - Because of the use of hydrogen as a cathode material, Ni-MH batteries have up to a 40 percent longer service life than ordinary Ni-Cad batteries of equivalent size. |
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Long cycle life - Up to 1,000 charge/discharge cycles. |
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No memory effect - Ni-Cad batteries suffer from a memory effect - when charging, the user must ensure that they are totally flat first, otherwise they “remember” how much charge they used to have and die much quicker. Ni-MH batteries have a negligible memory effect, making charging quicker and more convenient. |
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Performs at extreme temperatures - Capable of operation on discharge from -20°C to 50°C (-4°F to 122°F) and charge from 0°C to 45°C (32°F to 113ºF). |
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Environmentally friendly - Zero percent cadmium or other toxic chemicals such as mercury. |
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Cost efficiency - Rechargeable Ni-MH batteries are substantially less expensive than rechargeable lithium batteries. |
The first rechargeable lithium batteries were
commercialized in 1991. Rechargeable lithium batteries are produced as cylindrical lithium-ion or prismatic lithium-polymer batteries.
The energy density of lithium is typically twice that of the standard nickel-cadmium. Lithium batteries are low maintenance, with
no memory effect and no scheduled cycling required to prolong battery life. In addition, the self-discharge is less than half compared
to nickel-cadmium, making lithium well suited for modern applications, such as power tools, electric bicycles, laptops, LED lights,
portable medical devices, digital cameras, MP3 players, and electric vehicles.
Despite its overall advantages, lithium battery
technology has limitations that include fragility, safety, aging, capacity deterioration and higher manufacturing cost. Manufacturers
are constantly working to improve lithium battery technology with new and enhanced chemical combinations. Lithium batteries have
several advantages including:
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High capacity - Up to 100% higher energy density compared to standard nickel-cadmium batteries. |
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Low self-discharge - Self-discharge can be less than half that of nickel-based batteries. |
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Low maintenance - No periodic discharge is needed and there is no memory effect. Specialty cells can provide very high current to applications such as power tools. |
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Flexible form factor - Prismatic lithium polymer batteries can be produced in a wide variety of form factors for different products and applications. |
Lithium batteries also have several limitations:
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Requires protection circuit to maintain voltage and current within safe limits. |
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Poses safety issues due to the more-active characteristics of its basic materials. |
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Subject to aging when not in use - storage in a cool place at 40% charge reduces the aging effect. |
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Transportation restrictions - shipment of larger quantities may be subject to regulatory control. |
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Manufacturing cost is approximately 40% greater than nickel-cadmium. |
China
China’s market share of battery production is expected to
increase. China has a number of benefits in battery manufacturing, which are expected to drive this growth:
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Low Costs. China continues to have a significant low cost of labor as well as easy access to raw materials and land. |
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Proximity to electronics supply chain. Electronics manufacturing in general continues to shift to China, giving China-based manufacturers a further cost and cycle time advantage. |
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Proximity to end-markets. China has focused in recent years on building its research, development and engineering skill base in all aspects of higher end manufacturing, including batteries. |
Competitive Strengths
We believe the following competitive strengths contribute to our
success and differentiate us from our competitors:
Experienced management team
Our senior management team has extensive business
and industry experience. Our Chairman and Chief Executive Officer, Mr. Dang Yu Pan, has over 18 years of experience in China’s
battery industry. Our Chief Technology Officer, Mr. Wen Liang Li, has over 24 years of research experience in advanced battery
technologies and products. Additionally, other members of our senior management team have significant experience with respect to
other key aspects of our operations, including product design, manufacturing, and sales and marketing.
Market position
Since the Company’s inception, it has
primarily focused on the research, development and manufacture of Ni-MH battery cells. We have developed significant expertise
in Ni-MH battery technology and large-scale manufacturing that enables us to improve the quality of our products, reduce costs,
and keep pace with evolving industry standards. Our Ni-MH rechargeable batteries have been developed to respond to a number of
specific market requirements such as recyclability, high power, high energy density, long life, low cost and other important characteristics
for consumer and industrial applications. They are suitable for most applications where high currents, deep discharges and safety
are required. The consumer electronic industry and the high-end industrial energy storage industry have evolved significantly in
recent years. The demand for more compact and more powerful battery solutions has been driving the lithium battery sector grow
exponentially. In 2008 we established our subsidiary, SZ Springpower, to focus on specializing in the research, manufacturing and
marketing of lithium rechargeable batteries. In 2013 we completed the construction of our new lithium battery plant in Huizhou.
This new higher scale facility is dedicated to larger volume orders. Our lithium battery business has been growing rapidly and
we expect it will continue to grow as we gain more industry knowledge and acquire more customers. Our lithium battery segment has
increasingly become more important to our operations.
Well-established distribution channels
We sell our products to original equipment
manufacturers and a well-established network of distributors and resellers, which allows us to penetrate customer markets worldwide.
Our relationship with many distributors extends from our inception in 2001. We also continue to screen and identify our strongest
customers in each distribution channel and to focus our sales efforts towards the largest distributors and resellers in the fastest
growing industries, such as the mobile and wearable devices, electric vehicles and energy storage industries.
Proven product manufacturing capabilities
We selectively use automation in our manufacturing
process to ensure a high uniformity and precision in our products while maintaining our cost-competitiveness. We use automated
machinery in key stages of the manufacturing process while using manual labor for other stages to take advantage of the availability
of low-cost, skilled labor in China. We have received several accreditations, including the International Organization for Standardization
(ISO) 9001: 2000, ISO 14001, Conformite Europende (CE) and Underwriters Laboratories Inc. (UL) that attest to our quality management
requirements, manufacturing safety, controls, procedures and environmental performance.
Customer service expertise
We work closely with our major customers in
order to ensure high levels of customer satisfaction. To provide superior service and foster customer trust and loyalty, we offer
flexible delivery methods and product feedback opportunities to our customers. The Company provides the sales representatives and
marketing personnel with extensive training including necessary skills in answering questions relating to products and services,
proactively introducing potential customers about our products, and promptly responding to customer inquiries.
Our Strategy
Our goal is to become a global leader in the
development and manufacture of rechargeable battery products. We intend to achieve this goal by implementing the following strategies:
Continue to pursue cost-effective opportunities
Our operating model, coupled with our modern
manufacturing processes, has resulted in economies of scale, a low cost structure, and an ability to respond rapidly to customer
demands. We intend to achieve greater cost-effectiveness by expanding production capacity, increasing productivity and efficiency
and seeking to lower the unit cost of products through the use of advanced technologies.
Aggressively pursue distribution channels
We intend to broaden the scope of our distribution
arrangements to increase sales penetration in targeted markets. We intend to select additional distributors based on their access
to markets and retail outlets that are candidates for our products. In addition, we intend to expand our international sales presence
and diversify our revenue sources by taking efforts to increase the percentage of our net sales attributable to sales to emerging
new markets.
Expand existing and new product offerings
Since the commencement of battery operations
in 2001, we have expanded our product offerings to multiple product lines, which include in each product line batteries of varying
sizes, capacities and voltages. We intend to expand our existing lines of both Ni-MH and lithium batteries for use in other applications,
such as energy storage systems, hybrid-electric cars, pure electric vehicles, and devote resources to the development of higher-end
and higher-performance applications requiring higher ampere hour batteries.
Enhance marketing efforts to increase brand awareness
We continue to devote our efforts towards brand
development and utilize marketing concepts in an attempt to enhance the marketability of our products.
Products
Our Ni-MH rechargeable batteries are versatile
solutions for many diverse applications due to their long life, environmentally friendly materials, high power and energy, low
cost and safe applications. Developed to meet the requirement for increasingly higher levels of energy demanded by today’s
electronic products, our Ni-MH rechargeable batteries offer increased capacity and higher energy density over similarly sized standard
Ni-Cad rechargeable batteries. As a result, users can expect a longer time between charges and longer running time. Our Ni-MH rechargeable
batteries are available in both cylindrical and prismatic shapes.
In 2009, we completed the construction and
build-out of two production lines for the development and manufacturing of a range of lithium rechargeable batteries and products
in Shenzhen. In 2013, we completed the automated facility to produce higher volume orders of mobile device batteries and larger
format lithium batteries for electric vehicles, and energy storage systems in Huizhou. We produce Li-ion batteries and Li-polymer
batteries with hundreds of different models and specifications. Currently, we produce an average of 3.0-4.0 million lithium
battery units per month.
We produce an extensive line of batteries falling into two main
categories:
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Consumer Batteries – Relative to ordinary Ni-Cad rechargeable batteries, as well as their non-rechargeable counterparts, our Ni-MH and lithium batteries offer higher power capacity allowing for longer working time and shortened charging time during equivalent working periods. We produce A, AA and AAA sized batteries in blister packing as well as chargers and battery packs. |
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Industrial Batteries – These batteries are designed for electric bikes, power tools and electric toys. They are specifically designed for high-drain discharge applications possessing low internal resistance, more power, and longer discharging time. |
We also recycle scrap battery materials through outsourcing and
resell the recycled materials to some of our customers. We are currently testing this market and anticipate expanding our battery
recycling operations in the future.
Net sales for each of our product categories as a percentage of
net sales are set forth below:
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Year Ended December 31, | |
| |
2014 | | |
2013 | |
Ni-MH Batteries | |
| 51.0 | % | |
| 54.9 | % |
Lithium Batteries | |
| 46.5 | % | |
| 43.6 | % |
New Materials | |
| 2.5 | % | |
| 1.5 | % |
| |
| 100.0 | % | |
| 100.0 | % |
Supply of Raw Materials
The cost of the raw materials used in our rechargeable
batteries is a key factor in the pricing of our products. We purchase materials in volume, which allows us to negotiate better
pricing with our suppliers. Our purchasing department locates eligible suppliers of raw materials, striving to use only those suppliers
who have previously demonstrated quality control and reliability.
Currently, we purchase raw materials, consisted
primarily of metal materials including nickel oxide, nickel foam, metal hydride alloy and other battery components, such as membranes,
from suppliers located in China and Japan. For lithium batteries, we purchase raw materials consisting primarily of LiCoO2,
graphite and electrolyte. We believe that the raw materials and components used in manufacturing rechargeable batteries are
available from enough sources to be able to satisfy our manufacturing needs; however, some of our materials relating to nickel
and lithium are available from a limited number of suppliers. During the year ended December 31, 2014, no supplier accounted for
or over 10% of our total purchase amount. During the year ended December 31 2013, one major supplier accounted for 12.8% of our
total purchase amount. Presently, our relationships with suppliers are generally good and we expect that our suppliers will
be able to meet the anticipated demand for our products in the future. Our top suppliers include Xiamen Tungsten Co., Ltd,, Henan
Kelong new energy Co., Ltd, Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co., Ltd.
At times, the pricing and availability of raw
materials can be volatile, attributable to numerous factors beyond the Company’s control, including general economic conditions,
currency exchange rates, industry cycles, production levels or a supplier’s tight supply. To the extent that we experience
cost increases we may seek to pass such cost increases on to our customers, but cannot provide any assurance that we will be able
to do so successfully or that our business, results of operations and financial condition would not be adversely affected by increased
volatility of the cost and availability of raw materials.
Quality Control
We consider quality control an important
element of our business practices. We have stringent quality control systems that are implemented by more than 200 company-trained
staff members to ensure quality control over each phase of the production process, from the purchase of raw materials through each
step in the manufacturing process. Supported by advanced equipment, we utilize a scientific management system and precision inspection
measurement, capable of supplying stable, high-quality rechargeable batteries. Our quality control department executes the following
functions:
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Setting internal controls and regulations for semi-finished and finished products; |
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Testing samples of raw materials from suppliers; |
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Implementing sampling systems and sample files; |
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Maintaining quality of equipment and instruments; and |
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Articulating the responsibilities of quality control staff. |
We monitor quality and reliability in accordance
with the requirements of QSR, or Quality System Review, and ISO 9001 systems. We have received European Union’s CE attestation,
UL authentication, ISO 9001:2008 and ISO 14001 certification. We have passed stringent quality reviews and thus obtained OEM qualifications
from various domestic cellular phone brand names. With strong technological capabilities and use of automated equipment for core
aspects of the manufacturing process, we believe our product quality meets or even exceeds in certain key aspects international
industry standards.
Manufacturing
The manufacturing of rechargeable batteries
requires coordinated use of machinery and raw materials at various stages of production. We have a large-scale active production
base of 55,680 square meters in Shenzhen and 126,605 square meters facility in Huizhou, a dedicated design, sales and marketing
team, and approximately 3,950 company-trained employees. We use automated machinery which enables us to enhance uniformity and
precision during the manufacturing process. We intend to further improve our automated production lines and strive to continue
investing in manufacturing infrastructures to further increase our manufacturing capacity, which help us control the unit cost
of products.
The primary raw materials used in production
of rechargeable batteries include electrode materials, electrolytes, foils, cases and caps and separators. The electrodes are manufactured
using active materials, conductive agents and binder which are mixed with liquid. These mixtures are then uniformly coated onto
the thin metal foil, then after drying, the electrodes are cut down to the designated sizes. The positive electrode and negative
electrode are then wound together with a separator and inserted into a can, and electrolyte is filled. The sealing completes the
battery cell assembly. Some of these cells are then integrated into packages which are customized into a wide variety of configurations
to interface with different electronic devices.
In 2013, we completed construction of our manufacturing
factory in Huizhou, Guangdong Province, PRC. The factory houses a substantial part of the lithium battery production for the
Company and is equipped with more automated production lines. The factory’s production capacity is approximately two
to three times that of our current lithium battery production facility in Shenzhen.
In 2014, we completed construction of our materials
recycling factory in Ganzhou, Jiangxi Province, PRC and we began initial production in the factory in the first quarter of 2014.
Our Ni-MH facility currently produces approximately
11 million to 15 million battery units per month and our lithium facility produces approximately 4.0 million to 5.0 million units
per month. We are planning for moderate manufacturing capacity growth of approximately 30-40% for the lithium battery segment
in the next 12 months.
Major Customers
During the years ended December 31, 2014 and
2013, approximately 24.3% and 26.9% of our net sales were from our five largest customers, respectively. The percentages of net
sales disclosed for each of our major customers includes sales to groups of customers under common control or that could be deemed
affiliates of such major customers. During the year ended December 31, 2013, Energizer Battery Manufacturing, Inc. accounted for
10.8%of our net sales. No customer accounted for more than 10% of net sales during 2014. As of December 31, 2014 and 2013,
no single customer represented more than 10% of our accounts receivable.
Sales and Marketing
We have a broad sales network of approximately
101 sales and marketing staff in China and have one branch office in Hong Kong. Our sales staff in each of our offices targets
key customers by arranging in-person sales presentations and providing after-sales services. Our sales staff works closely with
our customers so that we can better address their needs and improve the quality and features of our products. We offer different
price incentives to encourage large-volume and long-term customers.
Sales to our customers are based primarily
on purchase orders we receive from time to time rather than firm, long-term purchase commitments from our customers. Uncertain
economic conditions and our general lack of long-term purchase commitments with our customers make it difficult for us to predict
revenue accurately over the longer term. Even in those cases where customers are contractually obligated to purchase products from
us, we may elect not to enforce our contractual rights immediately because of the long-term nature of our customer relationships
and for other business reasons, and instead may negotiate accommodations with customers regarding particular situations.
We target sales of our rechargeable batteries
and charging systems through original equipment manufacturers (“OEMs”), as well as distributors and resellers focused
on our target markets. We have contractual arrangements with distributors who market our products on a commission basis in particular
areas. Although OEM agreements typically contain volume-based pricing based on expected volumes, typically prices are rarely adjusted
retroactively if contract volumes are not achieved. We attempt to adjust future prices accordingly, but our ability to adjust prices
is generally based on market conditions which we cannot control.
Net sales based on the location of our customers as a percentage
of net sales is set forth below:
| |
Year Ended December 31, | |
| |
2014 | | |
2013 | |
China mainland | |
| 47.1 | % | |
| 48.9 | % |
Europe | |
| 20.3 | % | |
| 21.5 | % |
Asia, others | |
| 25.6 | % | |
| 21.6 | % |
North America | |
| 6.3 | % | |
| 7.2 | % |
Rest of the World | |
| 0.7 | % | |
| 0.8 | % |
Total | |
| 100.0 | % | |
| 100.0 | % |
While the largest portion of our sales are
made to customers in China Mainland and Hong Kong, our battery products are integrated in various devices and end-user products
and distributed worldwide, with approximately 47.1% of our products distributed to China Mainland, 20.3% to Europe, 25.6% to Asia,
6.3% to the United States, and 0.7% to other markets in 2014.
We mainly engage in marketing activities such
as attending industry-specific conferences and exhibitions to promote our products and brand name. We believe these activities
help in promoting our products and brand name among key industry participants.
Research and Development
To enhance our product quality, reduce cost,
and keep pace with technological advances and evolving market trends, we have established an advanced research and development
center. Our research and development center is not only focused on enhancing our Ni-MH and Lithium-based technologies by developing
new products and improving the performance of our current products, but also seeks to develop alternative technologies. Our research
and development center is currently staffed with over 390 research and development technicians who overlook our techniques department,
product development department, material analysis lab, and performance testing lab. These departments work together to research
new material and techniques, test battery performance, inspect products and to test performance of machines used in the manufacturing
process.
For the years ended December 31, 2014 and 2013,
we expended $7,709,618 and $5,711,269, respectively, in research and development.
Strategic Partnership with Freudenberg Nonwovens
In 2009, we entered into a strategic research
and development partnership with Freudenberg Nonwovens. Freudenberg utilizes our research and development center research facilities
in China to test their various separators. Freudenberg Nonwovens was the first to introduce nonwovens to the market over 70 years
ago and is now the largest and most diverse manufacturer of nonwovens in the world today. Separators are considered an integral
material for Ni-MH rechargeable batteries. We strongly believe the relationship with Freudenberg Nonwovens will continue to
improve our Ni-MH product quality, strengthen our research and development in nonwoven knowledge, which can create mutual benefits
in the Ni-MH battery development.
Competition
We face competition from many other battery
manufacturers, some of which have significantly greater name recognition and financial, technical, manufacturing, personnel and
other resources than we have. We compete against other Ni-MH and lithium battery producers, as well as manufacturers of other rechargeable
and non-rechargeable batteries. The main types of rechargeable batteries currently on the market include: lead-acid; nickel-cadmium;
nickel metal hydride; liquid lithium-ion and lithium-ion polymer. Competition is typically based on design, quality, stability,
and performance. The technology behind Ni-MH rechargeable batteries has consistently improved over time and we continue to enhance
our products to meet the competitive threats from its competitors. Our primary competitors in the Ni-MH battery market or other
similar competing rechargeable battery products include SANYO Electric Co., Ltd. Global, Matsushita Industrial Co., Ltd. (Panasonic),
BYD Company Ltd., GPI International, Ltd., and GS Yuasa Corporation. Our primary competitors in the lithium battery market or other
similar competing rechargeable battery products include Desay Corp., Coslight Group, Tianjin Lishen Battery Co. Ltd., and Amperex
Technology Limited.
Seasonality
The first quarter of each fiscal year tends
to be our slow season due to the Chinese New Year holidays. Our factories and operations usually shut down for 2 weeks during this
time, resulting in lower sales during the first quarter.
Intellectual Property
We rely on a combination of patent and trade
secret protection and other unpatented proprietary information to protect our intellectual property rights and to maintain and
enhance our competitiveness in the battery industry. We currently hold 136 patents in China and have 36 patent applications
pending in China. We also have two registered trademarks in China, which include “HFR” and its Chinese equivalent.
We also rely on unpatented technologies to
protect the proprietary nature of our product and manufacturing processes. We require that our management team and key employees
enter into confidentiality agreements that require the employees to assign the rights to any inventions developed by them during
the course of their employment with us. The confidentiality agreements include noncompetition and non-solicitation provisions that
remain effective during the course of employment and for periods following termination of employment, which vary depending on position
and location of the employees.
PRC Government Regulations
Business License
Any company that conducts business in the PRC
must have a business license that covers the scope of the business in which such company is engaged. We conduct our business
through our operating subsidiaries, SZ Highpower, SZ Springpower, GZ Highpower, HZ HTC and ICON, and each of our operating subsidiaries
holds a business license that covers its present business. Prior to expanding our business beyond the scope covered by our
business licenses, we are required to apply and receive approvals from the relevant PRC authorities (if applicable, based on the
new business in which we intend to engage) and conduct modification registration formalities with the competent administration
of industry and commerce. Companies that operate outside the scope of their licenses can be subjected to a fine of not more than
RMB20,000, if such operations do not violate the PRC Criminal Law, or a fine of not less than RMB20,000 but no more than RMB200,000
if such operations violate the PRC Criminal Law, or a fine of not less than RMB50,000 but not more than RMB500,000 if the such
operations harm human health, have serious hidden hazards to safety, threaten public safety or destroy environmental resources. Other
penalties can include disgorgement of income and being ordered to cease operations.
Environmental Regulations
The major environmental regulations applicable
to us include the PRC Environmental Protection Law, the PRC Law on the Prevention and Control of Water Pollution and its Implementation
Rules, the PRC Law on the Prevention and Control of Air Pollution and its Implementation Rules, the PRC Law on the Prevention and
Control of Solid Waste Pollution, and the PRC Law on the Prevention and Control of Noise Pollution. We aim to comply with environmental
laws and regulations and have acquired an ISO14004:2004 Environment Systems Certification and QC080000 Hazardous Substance Process
Management System.
We constructed our manufacturing facilities
with the PRC’s environmental laws and requirements in mind. We currently outsource the disposal of solid waste to a third
party-contractor. In 2014, we renewed our environmental permit, which expired in December 2014, from the Shenzhen Environment Protection
Bureau Longgang Bureau covering our manufacturing operations and providing for an annual output limit of Ni-MH rechargeable batteries. If we fail to comply with the provisions of the renewed permit, we could be
subject to fines, criminal charges or other sanctions by regulators, including the suspension or termination of our manufacturing
operations.
Our operating subsidiaries have received certifications
from the relevant PRC government agencies in charge of environmental protection, which indicate that their business operations
are in material compliance with the relevant PRC environmental laws and regulations. We have committed significant attention and
efforts to quality and environmental protection during our production process. In November 2010, we received a Clean Production
Award from the Guangdong Economic and Information Commission and Environmental Bureau. We are not currently subject to any
pending actions alleging any violations of applicable PRC environmental laws. We do not believe the existence of these environmental
laws, as currently written and interpreted, will materially hinder or adversely affect our business operations; however, there
can be no assurances of future events or changes in laws, or the interpretation of laws, governing our industry. Failure to comply
with PRC environmental protection laws and regulations may subject us to fines up to RMB 1,000,000, the exact amount of which is
determined on a case by case basis, or disrupt our operations and the construction of our new facility, result in the shutdown
of our operations temporarily or permanently, which may materially and adversely affect our business, results of operations and
financial condition.
During the year ended December 31, 2014, we
expended approximately $26,731 related to our compliance with environmental regulations.
Patent Protection in China
The PRC’s intellectual property protection
regime is consistent with those of other modern industrialized countries. The PRC has domestic laws for the protection of rights
in copyrights, patents, trademarks and trade secrets. The PRC is also a signatory to most of the world’s major intellectual
property conventions, including:
|
— |
Convention establishing the World Intellectual Property Organization (WIPO Convention) (June 4, 1980); |
|
— |
Paris Convention for the Protection of Industrial Property (March 19, 1985); |
|
— |
Patent Cooperation Treaty (January 1, 1994); and |
|
— |
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) (November 11, 2001). |
Patents in the PRC are governed by the China
Patent Law and its Implementing Regulations, each of which went into effect in 1985. Amended versions of the China Patent Law and
its Implementing Regulations came into effect in 2001 and 2003, respectively.
The PRC is signatory to the Paris Convention
for the Protection of Industrial Property, in accordance with which any person who has duly filed an application for a patent in
one signatory country shall enjoy, for the purposes of filing in the other countries, a right of priority during the period fixed
in the convention (12 months for inventions and utility models, and 6 months for industrial designs).
The Patent Law covers three kinds of patents,
i.e., patents for inventions, utility models and designs respectively. The Chinese patent system adopts the principle of first
to file. This means that, where more than one person files a patent application for the same invention, a patent can only be granted
to the person who first filed the application. Consistent with international practice, the PRC only allows the patenting of inventions
or utility models that possess the characteristics of novelty, inventiveness and practical applicability. For a design to be patentable,
it should not be identical with or similar to any design which, before the date of filing, has been publicly disclosed in publications
in the country or abroad or has been publicly used in the country, and should not be in conflict with any prior right of another.
PRC law provides that anyone wishing to exploit
the patent of another must conclude a written licensing contract with the patent holder and pay the patent holder a fee. One rather
broad exception to this, however, is that, where a party possesses the means to exploit a patent but cannot obtain a license from
the patent holder on reasonable terms and in reasonable period of time, the PRC State Intellectual Property Office, or SIPO, is
authorized to grant a compulsory license. A compulsory license can also be granted where a national emergency or any extraordinary
state of affairs occurs or where the public interest so requires. SIPO, however, has not granted any compulsory license up to now.
The patent holder may appeal such decision within three months from receiving notification by filing a suit in a people’s
court.
PRC law defines patent infringement as the
exploitation of a patent without the authorization of the patent holder. A patent holder who believes his patent is being infringed
may file a civil suit or file a complaint with a PRC local Intellectual Property Administrative Authority, which may order the
infringer to stop the infringing acts. Preliminary injunction may be issued by the People’s Court upon the patentee’s
or the interested parties’ request before instituting any legal proceedings or during the proceedings. Evidence preservation
and property preservation measures are also available both before and during the litigation. Damages in the case of patent infringement
is calculated as either the loss suffered by the patent holder arising from the infringement or the benefit gained by the infringer
from the infringement. If it is difficult to ascertain damages in this manner, damages may be reasonably determined in an amount
ranging from one to more times of the license fee under a contractual license. The infringing party may be also fined by Administration
of Patent Management in an amount of up to three times the unlawful income earned by such infringing party. If there is no unlawful
income so earned, the infringing party may be fined in an amount of up to RMB 500,000, or approximately $81,348.
Product Liability and Consumers Protection
Product liability claims may arise if the products
sold have any harmful effect on the consumers. The injured party may make a claim for damages or compensation. The General Principles
of the Civil Law of the PRC, which became effective in January 1987, state that manufacturers and sellers of defective products
causing property damage or injury shall incur civil liabilities for such damage or injuries.
The Product Quality Law of the PRC was enacted
in 1993 and amended in 2000 to strengthen the quality control of products and protect consumers’ rights and interests. Under
this law, manufacturers and distributors who produce or sell defective products may be subject to confiscation of earnings from
such sales, revocation of business licenses and imposition of fines, and in severe circumstances, may be subject to criminal liability.
The Law of the PRC on the Protection of the
Rights and Interests of Consumers was promulgated on October 31, 1993 and became effective on January 1, 1994 to protect consumers’
rights when they purchase or use goods or services. All business operators must comply with this law when they manufacture or sell
goods and/or provide services to customers.
The Tort Law of the PRC effective on July 1,
2010 requires that when the product defect endangers people’s life or property, the injured party may hold the producer or
the seller liable in tort and require that it remove obstacles, eliminate danger, or take other action. The Tort Law also requires
that when a product is found to be defective after it is put into circulation, the producer and the seller shall give timely warnings,
recall the defective product, or take other remedial measures.
Employment Laws
We are subject to laws and regulations governing
our relationship with our employees, including: wage and hour requirements, working and safety conditions, and social insurance,
housing funds and other welfare. These include local labor laws and regulations, which may require substantial resources for
compliance.
China’s National Labor Law, which became
effective on January 1, 1995, and China’s National Labor Contract Law, which became effective on January 1, 2008, permit
workers in both state and private enterprises in China to bargain collectively. The National Labor Law and the National Labor
Contract Law provide for collective contracts to be developed through collaboration between the labor union (or worker representatives
in the absence of a union) and management that specify such matters as working conditions, wage scales, and hours of work. The
laws also permit workers and employers in all types of enterprises to sign individual contracts, which are to be drawn up in accordance
with the collective contract. The National Labor Contract Law has enhanced rights for the nation’s workers, including
permitting open-ended labor contracts and severance payments. The legislation requires employers to provide written contracts
to their workers, restricts the use of temporary labor and makes it harder for employers to lay off employees. It also requires
that employees with fixed-term contracts be entitled to an indefinite-term contract after a fixed-term contract is renewed once
or the employee has worked for the employer for a consecutive ten-year period.
Tax
Pursuant to the Provisional Regulation of China
on Value Added Tax and their implementing rules, all entities and individuals that are engaged in the sale of goods, the provision
of repairs and replacement services and the importation of goods in China are generally required to pay VAT at a rate of 17.0%
of the gross sales proceeds received, less any deductible VAT already paid or borne by the taxpayer. Further, when exporting goods,
the exporter is entitled to a portion of or all the refund of VAT that it has already paid or borne.
Foreign Currency Exchange
The principal regulations governing foreign
currency exchange in China are the Foreign Exchange Administration Regulations promulgated by the State Council, as amended on
August 5, 2008, or the Foreign Exchange Regulations. Under the Foreign Exchange Regulations, the Renminbi is freely convertible
for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange
transactions. Conversion of Renminbi for capital account items, such as direct investments, loans, repatriation of investments
and investments in securities outside of China, however, is still subject to the approval of the PRC State Administration of Foreign
Exchange, or SAFE. Foreign-invested enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to
conduct foreign exchange business after providing valid commercial documents and, in the case of capital account item transactions,
obtaining approval from the SAFE. Capital investments by foreign-invested enterprises outside of China are also subject to limitations,
which include approvals by the Ministry of Commerce, the SAFE and the State Reform and Development Commission.
Dividend Distributions
Under applicable PRC regulations, enterprises
in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards
and regulations. In addition, enterprises in China is required to set aside at least 10.0% of its after-tax profit based on PRC
accounting standards each year as its statutory general reserves until the accumulative amount of such reserves reach 50.0% of
its registered capital. These reserves are not distributable as cash dividends. The board of directors of enterprise has the discretion
to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners
except in the event of liquidation.
Foreign Ownership of PRC Operating Subsidiaries
The establishment, approval and registered
capital requirement matters of wholly foreign-owned enterprises, such as our PRC subsidiaries, SZ Highpower, SZ Springpower, HZ
Highpower, HZ HTC and ICON, are regulated by the Wholly Foreign-owned Enterprise Law of the PRC promulgated and effective on April
12, 1986, as amended on October 31, 2000, and the Implementation Rules of the Wholly Foreign-owned Enterprise Law of the PRC effective
on December 12, 1990, as amended in 2001. The procedures of establishing SZ Highpower, SZ Springpower, HZ Highpower, HZ HTC
and ICON as wholly foreign-owned enterprises complied with such law and regulation.
Investment activities in the PRC by foreign
investors are principally governed by the Guidance Catalogue of Industries for Foreign Investment, or the Catalogue, which was
promulgated and is amended from time to time by the Ministry of Commerce and the National Development and Reform Commission. The
Catalogue divides industries into three categories: encouraged, restricted and prohibited. An industry not listed in the Catalogue
is generally open to foreign investment unless it is specifically restricted by other PRC regulations. In addition, the establishment
of wholly foreign-owned enterprises is generally permitted in most industries except for the restricted industries which are listed
in the Catalogue or restricted by other government regulations (which are subject to governmental approvals) and industries prohibited
from foreign investments. Pursuant to the currently effective Catalogue (2007 version) and other PRC regulations, the business
scope of SZ Highpower, SZ Springpower, HZ Highpower, GZ Highpower, HZ HTC and ICON as indicated on their business licenses does
not fall within the restricted or prohibited industries and is not restricted by other PRC regulations and, therefore, HKHTC is
permitted to invest in SZ Highpower, SZ Springpower, HZ Highpower and ICON in the form of a wholly foreign-owned enterprise.
Employees
On December 31, 2014, we had approximately
3,950 employees, all of whom were employed full-time. There are no collective bargaining contracts covering any of our employees.
We have not experienced any work stoppages and consider our relations with employees to be good.
ITEM 1A. RISK FACTORS
Any investment in our common stock involves
a high degree of risk. Potential investors should carefully consider the material risks described below and all of the information
contained in this Form 10-K before deciding whether to purchase any of our securities. Our business, financial condition or results
of operations could be materially adversely affected by these risks if any of them actually occur. The trading price of our shares
of common stock listed on the NASDAQ Global Market could decline due to any of these risks, and an investor may lose all or part
of his investment. Some of these factors have affected our financial condition and operating results in the past or are currently
affecting us. This report also contains forward-looking statements that involve risks and uncertainties. Our actual results could
differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks
faced described below and elsewhere in this Form 10-K.
RISKS RELATED TO OUR OPERATIONS
Our business depends in large part on the growth in demand for
portable electronic devices.
Many of our battery products are used to power
various portable electronic devices. Therefore, the demand for our batteries is substantially tied to the market demand for portable
electronic devices. A growth in the demand for portable electronic devices will be essential to the expansion of our business.
Our results of operations may be adversely affected by decreases in the general level of economic activity. Decreases in consumer
spending that may result from the current global economic downturn may weaken demand for items that use our battery products. A
decrease in the demand for portable electronic devices would likely have a material adverse effect on our results of operations. We
are unable to predict the duration and severity of the current disruption in financial markets and the global adverse economic
conditions and the effect such events might have on our business.
Our success depends on the success of manufacturers of the end
applications that use our battery products.
Because our products are designed to be used
in other products, our success depends on whether end application manufacturers will incorporate our batteries in their products.
Although we strive to produce high quality battery products, there is no guarantee that end application manufacturers will accept
our products. Our failure to gain acceptance of our products from these manufacturers could result in a material adverse effect
on our results of operations.
Additionally, even if a manufacturer decides
to use our batteries, the manufacturer may not be able to market and sell its products successfully. The manufacturer’s inability
to market and sell its products successfully could materially and adversely affect our business and prospects because this manufacturer
may not order new products from us. Therefore, our business, financial condition, results of operations and future success would
be materially and adversely affected.
We are and will continue to be subject to
declining average selling prices of consumer electronic devices, which may harm our results of operations.
Portable consumer electronic devices, such
as cellular phones, DVD players, laptop computers and tablets are subject to rapid declines in average selling prices due to rapidly
evolving technologies, industry standards and consumer preferences. Therefore, electronic device manufacturers expect suppliers,
such as our company, to cut their costs and lower the price of their products to lessen the negative impact on the electronic device
manufacturer’s own profit margins. As a result, we have previously reduced the price of some of our battery products and
expect to continue to face market-driven downward pricing pressures in the future. Our results of operations will suffer if we
are unable to offset any declines in the average selling prices of our products by developing new or enhanced products with higher
selling prices or gross profit margins, increasing our sales volumes or reducing our production costs.
Our success is highly dependent on continually
developing new and advanced products, technologies, and processes and failure to do so may cause us to lose our competitiveness
in the battery industry and may cause our profits to decline.
To remain competitive in the battery industry,
it is important to continually develop new and advanced products, technologies, and processes. There is no assurance that competitors’
new products, technologies, and processes will not render our existing products obsolete or non-competitive. Alternately, changes
in legislative, regulatory or industry requirements or in competitive technologies may render certain of our products obsolete
or less attractive. Our competitiveness in the battery market therefore relies upon our ability to enhance our current products,
introduce new products, and develop and implement new technologies and processes. We predominately manufacture and market
Ni-MH batteries, and to a lesser extent, Li-ion and Li-polymer batteries. If our competitors develop alternative products
with more enhanced features than our products, our financial condition and results of operations would be materially and adversely
affected.
The research and development of new products
and technologies is costly and time consuming, and there are no assurances that our research and development of new products will
either be successful or completed within anticipated timeframes, if at all. Our failure to technologically evolve and/or develop
new or enhanced products may cause us to lose competitiveness in the battery market and may cause our profits to decline. In addition,
in order to compete effectively in the battery industry, we must be able to launch new products to meet our customers’ demands
in a timely manner. However, we cannot provide assurance that we will be able to install and certify any equipment needed to produce
new products in a timely manner, or that the transitioning of our manufacturing facility and resources to full production under
any new product programs will not impact production rates or other operational efficiency measures at our manufacturing facility.
In addition, new product introductions and applications are risky, and may suffer from a lack of market acceptance, delay in related
product development and failure of new products to operate properly. Any failure by us successfully to launch new products, or
a failure by our customers to accept such products, could adversely affect our operating results.
We have historically depended on a limited
number of customers for a significant portion of our revenues and this dependence is likely to continue.
We have historically depended on a limited
number of customers for a significant portion of our net sales. Our top five customers accounted for approximately 24.3% and26.9%
of our net sales for the years ended December 31, 2014 and 2013, respectively. No customer accounted for more than 10% of net sales
for the year ended December 31, 2014.One customer, Energizer Battery Manufacturing, Inc., accounted for 10.8% of our net sales
for the year ended December 31, 2013. We anticipate that a limited number of customers will continue to contribute to a significant
portion of our net sales in the future. Maintaining the relationships with these significant customers is vital to the expansion
and success of our business, as the loss of a major customer could expose us to risk of substantial losses. Our sales and revenue
could decline and our results of operations could be materially adversely affected if one or more of these significant customers
stops or reduces its purchasing of our products, or if we fail to expand our customer base for our products.
Significant order cancellations, reductions or delays by our
customers could materially adversely affect our business.
Our sales are typically made pursuant to individual
purchase orders, and we generally do not have long-term supply arrangements with our customers, but instead work with our customers
to develop nonbinding forecasts of future requirements. Based on these forecasts, we make commitments regarding the level of business
that we will seek and accept, the timing of production schedules and the levels and utilization of personnel and other resources.
A variety of conditions, both specific to each customer and generally affecting each customer’s industry, may cause customers
to cancel, reduce or delay orders that were either previously made or anticipated. Generally, customers may cancel, reduce or delay
purchase orders and commitments without penalty, except for payment for services rendered or products competed and, in certain
circumstances, payment for materials purchased and charges associated with such cancellation, reduction or delay. Significant or
numerous order cancellations, reductions or delays by our customers could have a material adverse effect on our business, financial
condition or results of operations.
Substantial defaults by our customers on
accounts receivable or the loss of significant customers could have a material adverse effect on our business.
A substantial
portion of our working capital consists of accounts receivable from customers. No customer represented more than of 10% of our
accounts receivable as of December 31, 2014. If customers responsible for a significant amount of accounts receivable
were to become insolvent or otherwise unable to pay for products and services, or to make payments in a timely manner, our business,
results of operations or financial condition could be materially adversely affected. An economic or industry downturn could materially
adversely affect the servicing of these accounts receivable, which could result in longer payment cycles, increased collection
costs and defaults in excess of management’s expectations. A significant deterioration in our ability to collect on accounts
receivable could also impact the cost or availability of financing available to us.
A change in our product mix may cause our
results of operations to differ substantially from the anticipated results in any particular period.
Our overall profitability may not meet expectations
if our products, customers or geographic mix are substantially different than anticipated. Our profit margins vary among our battery
and new materials products, our customers and the geographic markets in which we sell our products. Consequently, if our mix of
any of these is substantially different from what is anticipated in any particular period, our profitability could be lower than
anticipated.
Certain disruptions in supply of and changes
in the competitive environment for raw materials integral to our products may adversely affect our profitability.
We use a broad range of materials and supplies,
including metals, chemicals and other electronic components in our products. A significant disruption in the supply of these materials
could decrease production and shipping levels, materially increase our operating costs and materially adversely affect our profit
margins. Shortages of materials or interruptions in transportation systems, labor strikes, work stoppages, war, acts of terrorism
or other interruptions to or difficulties in the employment of labor or transportation in the markets in which we purchase materials,
components and supplies for the production of our products, in each case may adversely affect our ability to maintain production
of our products and sustain profitability. If we were to experience a significant or prolonged shortage of critical components
from any of our suppliers and could not procure the components from other sources, we would be unable to meet our production schedules
for some of our key products and to ship such products to our customers in timely fashion, which would adversely affect our sales,
margins and customer relations.
Our industry is subject to supply shortages
and any delay or inability to obtain product components may have a material adverse effect on our business.
Our industry is subject to supply shortages,
which could limit the amount of supply available of certain required battery components. Any delay or inability to obtain supplies
may have a material adverse effect on our business. During prior periods, there have been shortages of components in the battery
industry and the availability of raw materials has been limited by some of our suppliers. We cannot assure investors that any future
shortages or allocations would not have such an effect on our business. A future shortage can be caused by and result from many
situations and circumstances that are out of our control, and such shortage could limit the amount of supply available of certain
required materials and increase prices adversely affecting our profitability.
Our future operating results may be affected by fluctuations
in costs of raw materials, such as nickel.
Our principal raw material is nickel, which
is available from a limited number of suppliers in China. The price of nickel was volatile during 2013 and 2014 and could be volatile
again. The price of nickel decreased 20% from January 2013 to December 2013 and 14% from January 2014 to December 2014. The prices
of nickel and other raw materials used to make our batteries increase and decrease due to factors beyond our control, including
general economic conditions, domestic and worldwide demand, labor costs or problems, competition, import duties, tariffs, energy
costs, currency exchange rates and those other factors described under “Certain disruptions in supply of and changes in the
competitive environment for raw materials integral to our products may adversely affect our profitability.” In an environment
of increasing prices for nickel and other raw materials, competitive conditions may impact how much of the price increases we can
pass on to our customers and to the extent we are unable to pass on future price increases in our raw materials to our customers,
our financial results could be adversely affected.
Our operations would be materially adversely
affected if third-party carriers were unable to transport our products on a timely basis.
All of our products are shipped through third
party carriers. If a strike or other event prevented or disrupted these carriers from transporting our products, other carriers
may be unavailable or may not have the capacity to deliver our products to our customers. If adequate third party sources to ship
our products are unavailable at any time, our business would be materially adversely affected.
We may not be able to increase our manufacturing
output in order to maintain our competitiveness in the battery industry.
We believe that our ability to provide cost-effective
products represents a significant competitive advantage over our competitors. In order to continue providing such cost-effective
products, we must maximize the efficiency of our production processes and increase our manufacturing output to a level that will
enable us to reduce the unit production cost of our products. Our ability to increase our manufacturing output is subject to certain
significant limitations, including:
|
· |
Our ability raise capital to acquire additional raw materials and expand our manufacturing facilities; |
|
· |
Delays and cost overruns, due to increases in raw material prices and problems with equipment vendors; |
|
· |
Delays or denial of required approvals and certifications by relevant government authorities; |
|
· |
Diversion of significant management attention and other resources; and |
|
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Failure to execute our expansion plan effectively. |
If we are not able to increase our manufacturing
output and reduce our unit production costs, we may be unable to maintain our competitive position in the battery industry. Moreover,
even if expand our manufacturing output, we may not be able to generate sufficient customer demand for our products to support
our increased production output.
The market for our products and services
is very competitive and, if we cannot effectively compete, our business will be adversely affected.
The market for our products and services is
very competitive and subject to rapid technological change. Many of our competitors are larger and have significantly greater assets,
name recognition and financial, personnel and other resources than we have. As a result, our competitors may be in a stronger position
to respond quickly to potential acquisitions and other market opportunities, new or emerging technologies and changes in customer
requirements. We cannot assure that we will be able to maintain or increase our market share against the emergence of these or
other sources of competition. Failure to maintain and enhance our competitive position could materially adversely affect our business
and prospects.
Our business may be adversely affected by
a global economic downturn, in addition to the continuing uncertainties in the financial markets.
The global economy experienced a pronounced
economic downturn in previous years. Global financial markets have and may in the future experience disruptions, including severely
diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment
rates, and uncertainty about economic stability. There is no assurance that there will not be deterioration in the global economy
in the future, the global financial markets and consumer confidence. If economic conditions deteriorate, our business and results
of operations could be materially and adversely affected.
Additionally, sales of consumer items such
as portable electronic devices, have slowed in previous years and there have been adverse changes in employment levels, job growth,
consumer confidence and interest rates. Our future results of operations may experience substantial fluctuations from period
to period as a consequence of these factors, and such conditions and other factors affecting consumer spending may affect the timing
of orders. Thus, any economic downturns generally would have a material adverse effect on our business, cash flows, financial condition
and results of operations.
Moreover, the inability of our customers and
suppliers to access capital efficiently, or at all, may have other adverse effects on our financial condition. For example, financial
difficulties experienced by our customers or suppliers could result in product delays; increase accounts receivable defaults; and
increase our inventory exposure. The inability of our customers to borrow money to fund purchases of our products reduces the demand
for our products and services and may adversely affect our results from operations and cash flow. These risks may increase if our
customers and suppliers do not adequately manage their business or do not properly disclose their financial condition to us.
Although we believe we have adequate liquidity
and capital resources to fund our operations internally, in light of current market conditions, our inability to access the capital
markets on favorable terms, or at all, may adversely affect our financial performance. The inability to obtain adequate financing
from debt or capital sources could force us to self-fund strategic initiatives or even forego certain opportunities, which in turn
could potentially harm our performance.
Maintaining and expanding our manufacturing
operations requires significant capital expenditures, and our inability or failure to maintain and expand our operations would
have a material adverse impact on our market share and ability to generate revenue.
We had capital expenditures of approximately
$8.1 million and $20.0 million in the years ended December 31, 2014 and 2013, respectively. We may incur significant additional
capital expenditures as a result of our expansion of our operations into our new production factory, as well as unanticipated events,
regulatory changes and other events that impact our business. If we are unable or fail to adequately maintain our manufacturing
capacity or quality control processes or adequately expand our production capabilities, we could lose customers and there could
be a material adverse impact on our market share and our ability to generate revenue.
Warranty claims, product liability claims
and product recalls could harm our business, results of operations and financial condition.
Our business inherently exposes us to potential
warranty and product liability claims, in the event that our products fail to perform as expected or such failure of our products
results, or is alleged to result, in bodily injury or property damage (or both). Such claims may arise despite our quality controls,
proper testing and instruction for use of our products, either due to a defect during manufacturing or due to the individual’s
improper use of the product. In addition, if any of our designed products are or are alleged to be defective, then we may be required
to participate in a recall of them.
Existing PRC laws and regulations do not require
us to maintain third party liability insurance to cover product liability claims. Although we have obtained products liability
insurance, if a warranty or product liability claim is brought against us, regardless of merit or eventual outcome, or a recall
of one of our products is required, such claim or recall may result in damage to our reputation, breach of contracts with our customers,
decreased demand for our products, costly litigation, additional product recalls, loss of revenue, and the inability to commercialize
some products. Additionally, our insurance policy imposes a ceiling for maximum coverage and high deductibles and we may be
unable to obtain sufficient amounts from our policy to cover a product liability claim. We may not be able to obtain any insurance
coverage for certain types of product liability claims, as our policy excludes coverage of certain types of claims. In such
cases, we may still incur substantial costs related to a product liability claim, which could adversely affect our results of operations.
Manufacturing or use of our battery products
may cause accidents, which could result in significant production interruption, delay or claims for substantial damages.
Our batteries, especially lithium batteries,
can pose certain safety risks, including the risk of fire. While we implement stringent safety procedures at all stages of battery
production that minimize such risks, accidents may still occur. Any accident, regardless of where it occurs, may result in significant
production interruption, delays or claims for substantial damages caused by personal injuries or property damages.
Our labor costs have increased and are likely to continue to
increase as a result of changes in Chinese labor laws.
We expect to experience an increase in our
cost of labor due to recent changes in Chinese labor laws which are likely to increase costs further and impose restrictions on
our relationship with our employees. In June 2007, the National People’s Congress of the PRC enacted new labor law legislation
called the Labor Contract Law and more strictly enforced existing labor laws. The law, which became effective on January 1, 2008,
amended and formalized workers’ rights concerning overtime hours, pensions, layoffs, employment contracts and the role of
trade unions. As a result of the law, we have had to increase the salaries of our employees, provide additional benefits to our
employees, and revise certain other of our labor practices. The increase in labor costs has increased our operating costs, which
we have not always been able to pass on to our customers. In addition, under the law, employees who either have worked for us for
10 years or more or who have had two consecutive fixed-term contracts must be given an “open-ended employment contract”
that, in effect, constitutes a lifetime, permanent contract, which is terminable only in the event the employee materially breaches
our rules and regulations or is in serious dereliction of his or her duties. Such non-cancelable employment contracts have substantially
increased our employment-related risks and limit our ability to downsize our workforce in the event of an economic downturn. No
assurance can be given that we will not in the future be subject to labor strikes or that we will not have to make other payments
to resolve future labor issues caused by the new laws. Furthermore, there can be no assurance that labor laws in the PRC will not
change further or that their interpretation and implementation will vary, which may have a negative effect upon our business and
results of operations.
We cannot guarantee the protection of our
intellectual property rights and if infringement of our intellectual property rights occurs, including counterfeiting of our products,
our reputation and business may be adversely affected.
To protect the reputation of our products,
we have sought to file or register intellectual property, as appropriate, in the PRC where we have our primary business presence.
As of December 31, 2014, we have registered two trademarks as used on our battery products, one in English and the other in its
Chinese equivalent. Our products are currently sold under these trademarks in the PRC, and we plan to expand our products to other
international markets. There is no assurance that there will not be any infringement of our brand name or other registered trademarks
or counterfeiting of our products in the future, in China or elsewhere. Should any such infringement and/or counterfeiting occur,
our reputation and business may be adversely affected. We may also incur significant expenses and substantial amounts of time and
effort to enforce our trademark rights in the future. Such diversion of our resources may adversely affect our existing business
and future expansion plans.
As of December 31, 2014, we held 136
Chinese patents and had 36 Chinese patent applications pending. Additionally, we have licensed patented technology from
Ovonic Battery Company, Inc. related to the manufacture of Ni-MH batteries. We believe that obtaining patents and enforcing
other proprietary protections for our technologies and products have been and will continue to be very important in enabling
us to compete effectively. However, there can be no assurance that our pending patent applications will issue, or that we
will be able to obtain any new patents, in China or elsewhere, or that our or our licensors’ patents and proprietary
rights will not be challenged or circumvented, or that these patents will provide us with any meaningful competitive
advantages. Furthermore, there can be no assurance that others will not independently develop similar products or will not
design around any patents that have been or may be issued to us or our licensors. Failure to obtain patents in certain
foreign countries may materially adversely affect our ability to compete effectively in those international markets. If a
sufficiently broad patent were to be issued from a competing application in China or elsewhere, it could have a material
adverse effect upon our intellectual property position in that particular market.
In addition, our rights to use the licensed
proprietary technologies of our licensors depends on the timely and complete payment for such rights pursuant to license agreements
between the parties; failure to adhere to the terms of these agreements could result in the loss of such rights and could materially
and adversely affect our business.
If our products are alleged to or found
to conflict with patents that have been or may be granted to competitors or others, our reputation and business may be adversely
affected.
Rapid technological developments in the battery
industry and the competitive nature of the battery products market make the patent position of battery manufacturers subject to
numerous uncertainties related to complex legal and factual issues. Consequently, although we either own or hold licenses to certain
patents in the PRC, and are currently processing several additional patent applications in the PRC, it is possible that no patents
will issue from any pending applications or that claims allowed in any existing or future patents issued or licensed to us will
be challenged, invalidated, or circumvented, or that any rights granted there under will not provide us adequate protection. As
a result, we may be required to participate in interference or infringement proceedings to determine the priority of certain inventions
or may be required to commence litigation to protect our rights, which could result in substantial costs. Further, other parties
could bring legal actions against us claiming damages and seeking to enjoin manufacturing and marketing of our products for allegedly
conflicting with patents held by them. Any such litigation could result in substantial cost to us and diversion of effort by our
management and technical personnel. If any such actions are successful, in addition to any potential liability for damages, we
could be required to obtain a license in order to continue to manufacture or market the affected products. There can be no assurance
that we would prevail in any such action or that any license required under any such patent would be made available on acceptable
terms, if at all. Failure to obtain needed patents, licenses or proprietary information held by others may have a material adverse
effect on our business. In addition, if we were to become involved in such litigation, it could consume a substantial portion of
our time and resources. Also, with respect to licensed technology, there can be no assurance that the licensor of the technology
will have the resources, financial or otherwise, or desire to defend against any challenges to the rights of such licensor to its
patents.
We rely on trade secret protections through
confidentiality agreements with our employees, customers and other parties; the breach of such agreements could adversely affect
our business and results of operations.
We rely on trade secrets, which we seek to
protect, in part, through confidentiality and non-disclosure agreements with our employees, customers and other parties. There
can be no assurance that these agreements will not be breached, that we would have adequate remedies for any such breach or that
our trade secrets will not otherwise become known to or independently developed by competitors. To the extent that consultants,
key employees or other third parties apply technological information independently developed by them or by others to our proposed
projects, disputes may arise as to the proprietary rights to such information that may not be resolved in our favor. We may be
involved from time to time in litigation to determine the enforceability, scope and validity of our proprietary rights. Any such
litigation could result in substantial cost and diversion of effort by our management and technical personnel.
The failure to manage growth effectively
could have an adverse effect on our employee efficiency, product quality, working capital levels, and results of operations.
Any significant growth in the market for our
products or our entry into new markets may require and expansion of our employee base for managerial, operational, financial, and
other purposes. As of December 31, 2014, we had approximately 3,950 full-time employees. During any growth, we may face problems
related to our operational and financial systems and controls, including quality control and delivery and service capacities. We
would also need to continue to expand, train and manage our employee base. Continued future growth will impose significant added
responsibilities upon the members of management to identify, recruit, maintain, integrate, and motivate new employees.
Aside from increased difficulties in the management
of human resources, we may also encounter working capital issues, as we will need increased liquidity to finance the purchase of
raw materials and supplies, development of new products, and the hiring of additional employees. For effective growth management,
we will be required to continue improving our operations, management, and financial systems and control. Our failure to manage
growth effectively may lead to operational and financial inefficiencies that will have a negative effect on our profitability.
We cannot assure investors that we will be able to timely and effectively meet that demand and maintain the quality standards required
by our existing and potential customers.
We are dependent on certain key personnel
and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations.
Our success is, to a certain extent, attributable
to the management, sales and marketing, and operational and technical expertise of certain key personnel. Each of the named executive
officers performs key functions in the operation of our business. The loss of a significant number of these employees could have
a material adverse effect upon our business, financial condition, and results of operations.
We are dependent on a technically trained
workforce and an inability to retain or effectively recruit such employees could have a material adverse effect on our business,
financial condition and results of operations.
We must attract, recruit and retain a sizeable
workforce of technically competent employees to develop and manufacture our products and provide service support. Our ability to
implement effectively our business strategy will depend upon, among other factors, the successful recruitment and retention of
additional highly skilled and experienced engineering and other technical and marketing personnel. There is significant competition
for technologically qualified personnel in our business and we may not be successful in recruiting or retaining sufficient qualified
personnel consistent with our operational needs.
Our planned expansion into new and existing
international markets poses additional risks and could fail,which could cost us valuable resources and affect our results of operations.
We are expanding sales of our products into
new and existing international markets including developing and developed countries, such as Japan, Russia, India, Turkey and Brazil. These
markets are untested for our products and we face risks in expanding the business overseas, which include differences in regulatory
product testing requirements, intellectual property protection (including patents and trademarks), taxation policy, legal systems
and rules, marketing costs, fluctuations in currency exchange rates and changes in political and economic conditions.
Our expansion into the Lithium battery business
is subject to substantial risks, which could result in a material adverse effect on our results of operations.
In September 2008, we completed the construction
and build-out of two production lines for the development and manufacturing of a range of lithium rechargeable batteries and products.
Prior to September 2008, we had very limited experience in the development and production of lithium batteries. While we are expanding
our production capabilities of lithium batteries, we may be unable to manufacture lithium battery products in the time frame and
amounts expected or may be unable to increase our sales of lithium products. The lithium ion battery market is competitive and
risky and we are unsure whether our lithium products will continue to gain market acceptance. We are competing against numerous
competitors with greater financial resources than us, and due to the difficulties of entry into these markets, we may be unsuccessful
and not be able to compete effectively in the lithium battery industry.
Adverse capital and credit market conditions
may significantly affect our ability to meet liquidity needs, access to capital and cost of capital.
The capital and credit markets have previously
experienced extreme volatility and disruption, including, among other things, extreme volatility in securities prices, severely
diminished liquidity and credit availability, ratings downgrades of certain investments and declining valuations of others. Governments
have taken unprecedented actions intended to address extreme market conditions that have included severely restricted credit and
declines in real estate values. In some cases, the markets have exerted downward pressure on availability of liquidity and credit
capacity for certain issuers. While historically these conditions have not impaired our ability to utilize our current credit facilities
and finance our operations, there can be no assurance that there will not be deterioration in financial markets and confidence
in major economies such that our ability to access credit markets and finance our operations, including the financing of the construction
of our new recycling facility in Ganzhou and of the machinery for our new lithium battery production facility in Huizhou, might
be impaired. Without sufficient liquidity, we may be forced to curtail our operations and our planned expansion of our new lithium
battery line and construction of our new materials recycling facility. Adverse market conditions may limit our ability to replace,
in a timely manner, maturing liabilities and access the capital necessary to operate and grow our business. As such, we may be
forced to delay raising capital or bear an unattractive cost of capital which could decrease our profitability and significantly
reduce our financial flexibility. The tightening of credit in financial markets could adversely affect the ability of our customers
to obtain financing for purchases of our products and could result in a decrease in or cancellation of orders for our products.
Our results of operations, financial condition, cash flows and capital position could be materially adversely affected by disruptions
in the financial markets.
We have been relying on bank facilities to finance our expansion
of new plants, which increased our debt asset ratio. We may not have sufficient cash to meet our payment obligations.
In 2013, we completed the construction of our
large scale lithium battery production facility in Huizhou. The Company has been leveraging from various Chinese banks to fund
our expansion to meet the demand from the fast growing lithium battery market in mobile and portable consumer devices, vehicles
of various sizes, and energy storage systems. The management of the Company has taken and will take a number of actions and will
continue to address our high debt level situation in order to restore the Company to a sound financial position with an appropriate
business strategy going forward. These actions can include market more higher-margined lithium battery products and systems; control
cost in operating expenses, and improve management efficiency; and introduce strategic investment. If we are not successful in
implementing these actions, we may not have sufficient cash to meet our payment obligations.
Our quarterly results may fluctuate because
of many factors and, as a result, investors should not rely on quarterly operating results as indicative of future results.
Fluctuations in operating results or the failure
of operating results to meet the expectations of public market analysts and investors may negatively impact the value of our securities.
Quarterly operating results may fluctuate in the future due to a variety of factors that could affect revenues or expenses in any
particular quarter. Fluctuations in quarterly operating results could cause the value of our securities to decline. Investors should
not rely on quarter-to-quarter comparisons of results of operations as an indication of future performance. As a result of the
factors listed below, it is possible that in the future periods results of operations may be below the expectations of public market
analysts and investors. This could cause the market price of our securities to decline. Factors that may affect our quarterly results
include:
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Vulnerability of our business to a general economic downturn in China; |
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Fluctuation and unpredictability of costs related to the raw materials used to manufacture our products; |
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Seasonality of our business; |
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Changes in the laws of the PRC that affect our operations; |
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Competition from our competitors; and |
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Our ability to obtain necessary government certifications and/or licenses to conduct our business. |
Our stock price may be negatively affected
if we become subject to the recent scrutiny, criticism and negative publicity involving U.S. listed Chinese companies.
Recently, U.S. public companies that have substantially
all of their operations in China, particularly companies like us which have completed share exchanges or reverse merger transactions,
have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory
agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting
irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies
or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity,
the publicly traded stock of many U.S.-listed Chinese companies has sharply decreased in value and, in some cases, has become virtually
worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions, and are conducting internal
and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative
publicity will have on our Company, our business and our stock price. If we become the subject of any unfavorable allegations,
whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations
and/or defend our company. This situation will be costly and time consuming and distract our management from growing our company.
If such allegations are not proven to be groundless, our company and business operations will be severely negatively affected and
your investment in our stock could be rendered worthless.
The disclosures in our reports and other filings with the SEC
and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC Accordingly, our public
disclosure should be reviewed in light of the fact that no governmental agency that is located in the PRC where substantially all
of our operations are located has conducted any due diligence on our operations or reviewed or cleared any of our disclosures.
We are regulated by the SEC and our reports
and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under
the Securities Act and the Exchange Act. Unlike public reporting companies whose operations are located primarily in the United
States, however, substantially all of our operations are located in China. Because substantially all of our operations and business
take place in China, it may be more difficult for the staff of the SEC to overcome the geographic and cultural obstacles that are
present when reviewing our disclosures. These same obstacles are not present for similar companies whose operations or business
take place entirely or primarily in the United States. Furthermore, our SEC reports and other disclosures and public pronouncements
are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports and other
filings are not subject to the review of China Securities Regulatory Commission, a PRC regulator that is tasked with oversight
of the capital markets in China. Accordingly, you should review our SEC reports, filings and our other public pronouncements with
the understanding that no local regulator has done any due diligence on our company and with the understanding that none of our
SEC reports, other filings or any of our other public pronouncements has been reviewed or otherwise been scrutinized by any local
regulator.
We have outstanding warrants and options,
and future sales of the shares obtained upon exercise of these options or warrants could adversely affect the market price of
our common stock.
As of December 31, 2014, we had
outstanding options exercisable for an aggregate of 265,000 shares of common stock at a weighted average exercise price of
$3.45 per share and warrants exercisable for an aggregate of 740,001 shares of common stock at a weighted average exercise
price of $5.43 per share. We have registered the issuance of all the shares issuable upon exercise of the options and 540,001
of the shares underlying warrant, and they will be freely tradable by the exercising party upon issuance. The holders may
sell these shares in the public markets from time to time, without limitations on the timing, amount or method of sale. As
our stock price rises, the holders may exercise their warrants and options and sell a large number of shares. This could
cause the market price of our common stock to decline.
RISKS RELATED TO DOING BUSINESS IN CHINA
The PRC government exerts substantial influence over the manner
in which we must conduct our business activities.
The PRC government has exercised and continues
to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our
ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, import
and export tariffs, environmental regulations, land use rights, property, and other matters. We believe that our operations in
China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments
of the jurisdictions in which we operate may impose new, stricter regulations or interpretations of existing regulations that would
require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.
Substantially all of our assets are located
in the PRC and substantially all of our revenues are derived from our operations in China, and changes in the political and economic
policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and accordingly
on the results of our operations and financial condition.
Our business operations may be adversely affected
by the current and future political environment in the PRC. The Chinese government exerts substantial influence and control over
the manner in which we must conduct our business activities. Our ability to operate in China may be adversely affected by changes
in Chinese laws and regulations, including those relating to taxation, import and export tariffs, raw materials, environmental
regulations, land use rights, property and other matters. Under the current government leadership, the government of the PRC has
been pursuing economic reform policies that encourage private economic activities and greater economic decentralization. There
is no assurance, however, that the government of the PRC will continue to pursue these policies, or that it will not significantly
alter these policies from time to time without advance notice.
Our operations are subject to PRC laws and
regulations that are sometimes vague and uncertain. Any changes in such PRC laws and regulations, or the interpretations thereof,
may have a material and adverse effect on our business.
The PRC’s legal system is a civil law
system based on written statutes. Unlike the common law system prevalent in the United States, decided legal cases have little
value as precedent in China. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations,
including but not limited to, governmental approvals required for conducting business and investments, laws and regulations governing
the battery industry, national security-related laws and regulations and export/import laws and regulations, as well as commercial,
antitrust, patent, product liability, environmental laws and regulations, consumer protection, and financial and business taxation
laws and regulations.
The Chinese government has been developing
a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing
with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However,
because these laws and regulations are relatively new, and because of the limited volume of published cases and judicial interpretation
and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties.
New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.
Our principal operating subsidiaries, SZ Highpower
and SZ Springpower are considered foreign invested enterprises under PRC laws, and as a result are required to comply with PRC
laws and regulations, including laws and regulations specifically governing the activities and conduct of foreign invested enterprises.
We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our businesses. If the
relevant authorities find us in violation of PRC laws or regulations, they would have broad discretion in dealing with such a violation,
including, without limitation:
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Revoking our business license, other licenses or authorities; |
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Requiring that we restructure our ownership or operations; and |
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Requiring that we discontinue any portion or all of our business. |
The disclosures in our reports and other
filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC. Accordingly,
our public disclosure should be reviewed in light of the fact that no governmental agency that is located in China where substantially
all of our operations and business are located have conducted any due diligence on our operations or reviewed or cleared any of
our disclosures.
We are regulated by the SEC and our reports
and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under
the Securities Act and the Exchange Act. Unlike public reporting companies whose operations are located primarily in the United
States, however, substantially all of our operations are located in China. Since substantially all of our operations and business
take place in China, it may be more difficult for the Staff of the SEC to overcome the geographic and cultural obstacles that are
present when reviewing our disclosures. These same obstacles are not present for similar companies whose operations or business
take place entirely or primarily in the United States. Furthermore, our SEC reports and other disclosures and public pronouncements
are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports and other
filings are not subject to the review of China Securities Regulatory Commission, a PRC regulator that is tasked with oversight
of the capital markets in China. Accordingly, you should review our SEC reports, filings and our other public pronouncements with
the understanding that no local regulator has done any due diligence on our company and with the understanding that none of our
SEC reports, other filings or any of our other public pronouncements has been reviewed or otherwise been scrutinized by any local
regulator.
Our auditors, like other independent registered public accounting firms operating in China and to the extent their audit clients have operations
in China, is not permitted to be subject to full inspection by the Public Company Accounting Oversight Board and, as such, you
may be deprived of the benefits of such inspection.
Our independent registered public accounting
firm that issued the audit reports included in our annual reports filed with the SEC, as auditors of companies that are traded
publicly in the United States and registered with the US Public Company Accounting Oversight Board (United States), or PCAOB,
are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws
of the United States and professional standards.
However, our operations are solely located
in the PRC, a jurisdiction where PCAOB is currently unable to conduct inspections without the approval of the PRC authorities.
Our independent registered public accounting firm, like others operating in China (and Hong Kong, to the extent their audit clients
have operations in China), is currently not subject to inspection conducted by the PCAOB. Inspections of other firms that the PCAOB
has conducted outside China have identified deficiencies in those firms’ audit procedures and quality control procedures,
which may be addressed as part of the inspection process to improve future audit quality. The inability of the PCAOB to conduct
full inspections of auditors operating in China makes it more difficult to evaluate our auditors’ audit procedures or quality
control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.
The scope of our business license in China
is limited, and we may not expand or continue our business without government approval and renewal, respectively.
Our principal operating subsidiaries, SZ Highpower
and ICON, are wholly foreign-owned enterprises, commonly known as WFOEs. A WFOE can only conduct business within its approved business
scope, which appears on the business license since its inception. Our license permits us to design, manufacture, sell and market
battery products throughout the PRC. Any amendment to the scope of our business requires further application and government approval.
Prior to expanding our business and engaging in activities that are not covered by our current business licenses, we are required
to apply and receive approval from the relevant PRC government authorities. In order for us to expand business beyond the
scope of our license, we will be required to enter into a negotiation with the authorities for the approval to expand the scope
of our business. PRC authorities, which have discretion over business licenses, may reject our request to expand the scope of our
business licenses to include our planned areas of expansion. We will be prohibited from engaging in any activities that the
PRC authorities do not approve in our expanded business licenses. Companies that operate outside the scope of their licenses
can be subjected to fines, disgorgement of income and ordered to cease operations. Our business and results of operations
may be materially and adversely affected if we are unable to obtain the necessary government approval for expanded business licenses
that cover any areas in which we wish to expand.
We are subject to a variety of environmental
laws and regulations related to our manufacturing operations. Our failure to comply with environmental laws and regulations may
have a material adverse effect on our business and results of operations.
We are subject to various environmental laws
and regulations in China that require us to obtain environmental permits for our battery manufacturing operations. Our current
environmental permit from the Shenzhen Environment Protection Bureau Longgang Sub-bureau (the “Bureau”) covering our
manufacturing operations expires on December 30, 2015. Historically, under a previous permit which expired in September 2007, we
substantially exceeded the approved annual output limit of Ni-MH rechargeable batteries set forth in the permit. Although we do
not currently exceed the approved annual output limits under the new permit, we cannot guarantee that this will continue to be
the case. Additionally, our current permit does not cover one of our existing premises at our manufacturing facility. If we fail
to comply with the provisions of our permit, we could be subject to fines, criminal charges or other sanctions by regulators, including
the suspension or termination of our manufacturing operations.
To the extent we ship our products outside
of the PRC, or to the extent our products are used in products sold outside of the PRC, they may be affected by the following:
The transportation of non-rechargeable and rechargeable lithium batteries is regulated by the International Civil Aviation Organization
(ICAO), and corresponding International Air Transport Association (IATA), Pipeline & Hazardous Materials Safety Administration
(PHMSA), Dangerous Goods Regulations and the International Maritime Dangerous Goods Code (IMDG), and in the PRC by General Administration
of Civil Aviation of China and Maritime Safety Administration of People’s Republic of China. These regulations are based
on the United Nations (UN) Recommendations on the Transport of Dangerous Goods Model Regulations and the UN Manual of Tests and
Criteria. We currently ship our products pursuant to ICAO, IATA and PHMSA hazardous goods regulations. New regulations that pertain
to all lithium battery manufacturers went into effect in 2003 and 2004, and additional regulations went into effect on October
1, 2009. The regulations require companies to meet certain testing, packaging, labeling and shipping specifications for safety
reasons. We comply with all current PRC and international regulations for the shipment of our products, and will comply with any
new regulations that are imposed. We have established our own testing facilities to ensure that we comply with these regulations.
If we were unable to comply with the new regulations, however, or if regulations are introduced that limit our ability to transport
products to customers in a cost-effective manner, this could have a material adverse effect on our business, financial condition
and results of operations.
We cannot assure that at all times we will
be in compliance with environmental laws and regulations or our environmental permits or that we will not be required to expend
significant funds to comply with, or discharge liabilities arising under, environmental laws, regulations and permits. Additionally,
these regulations may change in a manner that could have a material adverse effect on our business, results of operations and financial
condition. We have made and will continue to make capital and other expenditures to comply with environmental requirements.
Furthermore, our failure to comply with applicable
environmental laws and regulations worldwide could harm our business and results of operations. The manufacturing, assembling and
testing of our products require the use of hazardous materials that are subject to a broad array of environmental, health and safety
laws and regulations. Our failure to comply with any of these applicable laws or regulations could result in:
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Regulatory penalties, fines and legal liabilities; |
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Suspension of production; |
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Alteration of our fabrication, assembly and test processes; and |
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Curtailment of our operations or sales. |
In addition, our failure to manage the use,
transportation, emission, discharge, storage, recycling or disposal of hazardous materials could subject us to increased costs
or future liabilities. Existing and future environmental laws and regulations could also require us to acquire pollution abatement
or remediation equipment, modify our product designs or incur other expenses associated with such laws and regulations. Many new
materials that we are evaluating for use in our operations may be subject to regulation under existing or future environmental
laws and regulations that may restrict our use of one or more of such materials in our manufacturing, assembly and test processes
or products. Any of these restrictions could harm our business and results of operations by increasing our expenses or requiring
us to alter our manufacturing processes.
PRC regulations relating to acquisitions
of PRC companies by foreign entities may create regulatory uncertainties that could restrict or limit our ability to operate, including
our ability to pay dividends. Our failure to obtain the prior approval of the China Securities Regulatory Commission, or the CSRC,
for any offering of our common stock could have a material adverse effect on our business, operating results, reputation and trading
price of our common stock.
The PRC State Administration of Foreign Exchange,
or “SAFE,” issued a public notice in November 2005, known as Circular 75, concerning the use of offshore holding companies
in mergers and acquisitions in China. The public notice provides that if an offshore company controlled by PRC residents intends
to acquire a PRC company, such acquisition will be subject to registration with the relevant foreign exchange authorities. The
public notice also suggests that registration with the relevant foreign exchange authorities is required for any sale or transfer
by the PRC residents of shares in an offshore holding company that owns an onshore company. The PRC residents must each submit
a registration form to the local SAFE branch with respect to their ownership interests in the offshore company, and must also file
an amendment to such registration if the offshore company experiences material events, such as changes in the share capital, share
transfer, mergers and acquisitions, spin-off transactions or use of assets in China to guarantee offshore obligations. If any PRC
resident stockholder of an offshore holding company fails to make the required SAFE registration and amended registration, the
onshore PRC subsidiaries of that offshore company may be prohibited from distributing their profits and the proceeds from any reduction
in capital, share transfer or liquidation to the offshore entity. In May 2011, the SAFE promulgated new operational rules, known
as Notice 19, for the implementation of Circular 75. Failure to comply with the SAFE registration and amendment requirements of
Circular 75, as applied by SAFE in accordance with Notice 19 could result in liability under PRC laws for evasion of applicable
foreign exchange restrictions. Most of our PRC resident stockholders, as defined in the SAFE notice, have not registered with the
relevant branch of SAFE, as currently required, in connection with their former ownership of equity interests in HKHTC. Because
of uncertainty of how the SAFE notice will be further interpreted and enforced, we cannot be sure how it will affect our business
operations or future plans. For example, our subsidiaries’ ability to conduct foreign exchange activities, such as the remittance
of dividends and foreign currency-denominated borrowings, may be subject to compliance with the SAFE notice by our PRC resident
beneficial holders. Failure by our PRC resident beneficial holders could subject these PRC resident beneficial holders to fines
or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries’ ability to make
distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.
On August 8, 2006, the PRC Ministry of Commerce
(“MOFCOM”), joined by the State-owned Assets Supervision and Administration Commission of the State Council, the State
Administration of Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission and
SAFE, released a substantially amended version of the Provisions for Foreign Investors to Merge with or Acquire Domestic Enterprises
(the “Revised M&A Regulations”), which took effect on September 8, 2006. These rules significantly revised China’s
regulatory framework governing onshore-to-offshore restructurings and foreign acquisitions of domestic enterprises. These rules
implemented greater PRC government attention to cross-border merger, acquisition and other investment activities, by confirming
MOFCOM as a key regulator for issues related to mergers and acquisitions in China and requiring MOFCOM approval of a broad range
of merger, acquisition and investment transactions. Further, the rules established reporting requirements for acquisition of control
by foreigners of companies in key industries, and reinforce the ability of the Chinese government to monitor and prohibit foreign
control transactions in key industries.
Among other things, the Revised M&A Regulations
include provisions that require that an offshore special purpose vehicle, or SPV, formed for listing purposes and controlled directly
or indirectly by PRC companies or individuals must obtain the approval of the CSRC prior to the listing and trading of such SPV’s
securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures specifying
documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings. Highpower’s
PRC counsel, ZhongLun Law Firm has advised us that because we completed our onshore-to-offshore restructuring before September
8, 2006, the effective date of the new regulation, it is not necessary for us to submit the application to the CSRC for its approval,
and the listing and trading of our common stock does not require CSRC approval.
If the CSRC or another PRC regulatory agency
subsequently determines that CSRC approval was required for any transaction prior to September 21, 2006 not receiving prior approval,
we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. These regulatory agencies may
impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation
of the proceeds from an offering of securities into the PRC, or take other actions that could have a material adverse effect on
our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our common
stock. The CSRC or other PRC regulatory agencies also may take actions requiring us, or making it advisable for us, to halt any
offering before settlement and delivery of the securities offered. Consequently, if investors engage in market trading or other
activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not
occur.
Also, if later the CSRC requires that we obtain
its approval for any transaction not receiving prior approval, we may be unable to obtain a waiver of the CSRC approval requirements,
if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding this CSRC
approval requirement could have a material adverse effect on the trading price of our common stock.
Furthermore, the Circular on establishing the
Security Review System for Merger and Acquisition of Domestic Enterprise by Foreign Investors was promulgated by the General Office
of the State Council on February 3, 2011 and the Ministry of Commerce issued the corresponding implementation rules on August 25,
2011. According to these rules, a foreign investor’s acquisitions of Chinese companies in the fields of military, energy
and resources, infrastructure, important agricultural products, infrastructure, transport service, key technology and major equipment
manufacturing, and other restricted fields requires security review by a ministerial panel established and governed under the direction
of the State Council and led by the National Development and Reform Commission and Ministry of Commerce.
Complying with the requirements of the above
rules to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval
from PRC Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could also affect our ability
to expand our business.
If our land use rights or the land use rights of our landlord
are revoked, we would be forced to relocate operations.
Under Chinese law land is owned by the state
or rural collective economic organizations. The state issues to the land users the land use right certificates. Land use rights
can be revoked and the land users forced to vacate at any time when redevelopment of the land is in the public interest. The public
interest rationale is interpreted quite broadly and the process of land appropriation may be less than transparent. We acquired
approximately 126,605 square meters of land equity in Huizhou from the Huizhou State-Owned Land Resource in 2007 upon which we
began constructing our new manufacturing facility. We also acquired 58,669 square meters of land equity in Ganzhou, Guangdong,
China in February 2012 from the Ganzhou Land and Resource Bureau upon which we have a facility to house
our new materials business. Besides the land use rights in Huizhou and Ganzhou, we rely on the land use rights of our landlords
for other facilities, and the loss of our own land use rights or our landlords’ land use rights would require us to identify
and relocate our operations, which could have a material adverse effect on our financial condition and results of operations. Any
loss of this land use right would require us to identify and relocate our manufacturing and other facilities, which could have
a material adverse effect on our financial condition and results of operations.
We will not be able to complete an acquisition
of prospective acquisition targets in the PRC unless their financial statements can be reconciled to U.S. generally accepted accounting
principles in a timely manner.
Companies based in the PRC may not have properly
kept financial books and records that may be reconciled with U.S. generally accepted accounting principles. If we attempt to acquire
a significant PRC target company and/or its assets, we would be required to obtain or prepare financial statements of the target
that are prepared in accordance with and reconciled to U.S. generally accepted accounting principles. Federal securities laws require
that a business combination meeting certain financial significance tests require the public acquirer to prepare and file historical
and/or pro forma financial statement disclosure with the SEC. These financial statements must be prepared in accordance with, or
be reconciled to U.S. generally accepted accounting principles and the historical financial statements must be audited in accordance
with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. If a proposed acquisition target
does not have financial statements that have been prepared in accordance with, or that can be reconciled to, U.S. generally accepted
accounting principles and audited in accordance with the standards of the PCAOB, we will not be able to acquire that proposed acquisition
target. These financial statement requirements may limit the pool of potential acquisition targets with which we may acquire and
hinder our ability to expand our retail operations. Furthermore, if we consummate an acquisition and are unable to timely file
audited financial statements and/or pro forma financial information required by the Exchange Act, such as Item 9.01 of Form 8-K,
we will be ineligible to use the SEC’s short-form registration statement on Form S-3 to raise capital, if we are otherwise
eligible to use a Form S-3. If we are ineligible to use a Form S-3, the process of raising capital may be more expensive and time
consuming and the terms of any offering transaction may not be as favorable as they would have been if we were eligible to use
Form S-3.
We face risks related to natural disasters,
terrorist attacks or other events in China that may affect usage of public transportation, which could have a material adverse
effect on our business and results of operations.
Our business could be materially and adversely
affected by natural disasters, terrorist attacks or other events in China. For example, in early 2008, parts of China suffered
a wave of strong snow storms that severely impacted public transportation systems. In May 2008, Sichuan Province in China suffered
a strong earthquake measuring approximately 8.0 on the Richter scale that caused widespread damage and casualties. The May
2008 Sichuan earthquake has had a material adverse effect on the general economic conditions in the areas affected by the earthquake. Any
future natural disasters, terrorist attacks or other events in China could cause a reduction in usage of or other severe disruptions
to, public transportation systems and could have a material adverse effect on our business and results of operations.
We face uncertainty from China’s Circular
on Strengthening the Administration of Enterprise Income Tax on Non-Resident Enterprises' Share Transfer (“Circular 698”)
that was released in December 2009 with retroactive effect from January 1, 2008.
The Chinese State Administration of Taxation
(SAT) released a circular (Guoshuihan No. 698 – Circular 698) on December 15, 2009 that addresses the transfer of shares
by nonresident companies. Circular 698, which is effective retroactively to January 1, 2008, may have a significant impact
on many companies that use offshore holding companies to invest in China. Circular 698, which provides parties with a short
period of time to comply its requirements, indirectly taxes foreign companies on gains derived from the indirect sale of a Chinese
company. Where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise by selling the shares
in an offshore holding company, and the latter is located in a country or jurisdiction where the effective tax burden is less than
12.5% or where the offshore income of his, her, or its residents is not taxable, the foreign investor is required to provide the
tax authority in charge of that Chinese resident enterprise with the relevant information within 30 days of the transfers. Moreover,
where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise through an abuse of form of organization
and there are no reasonable commercial purposes such that the corporate income tax liability is avoided, the PRC tax authority
will have the power to re-assess the nature of the equity transfer in accordance with PRC’s “substance-over-form”
principle and deny the existence of the offshore holding company that is used for tax planning purposes.
The SAT issued Bulletin of the State of Taxation
[2011] No. 24 (Bulletin) on March 28, 2011, in which various issues regarding the tax administration for non-PRC resident enterprises
and clarifications on Circular 698 were addressed. The Bulletin defined some parameters stipulated in Circular 698, which, if a
non-resident enterprise were to fall under, would be subject to the Circular requirements including that (a) “foreign investor
(party with effective control)” applies to all foreign investors who have indirectly transferred a Chinese resident enterprise
and (b) that “effective tax burden” refers to the effective tax imposed on the gains on the share transfer transaction
per se. However, the SAT is expected to issue further clarification and guidance with regard to how to decide “abuse of form
of organization” and “reasonable commercial purpose,” which can be utilized by us to determine if we comply with
Circular 698.
If we fail to comply with the requirements
under Circular 698 and the Bulletin, we may become at risk of being taxed and we may also be required to expend valuable resources
to comply with Circular 698 and the Bulletin or to establish that we should not be taxed, which could have a material adverse effect
on our financial condition and results of operations.
The foreign currency exchange rate between U.S. Dollars and Renminbi
could adversely affect our financial condition.
To the extent that we need to convert U.S.
Dollars into Renminbi for our operational needs, our financial position and the price of our common stock may be adversely affected
should the Renminbi appreciate against the U.S. Dollar at that time. Conversely, if we decide to convert Renminbi into U.S. Dollars
for the operational needs or paying dividends on our common stock, the dollar equivalent of our earnings from our subsidiaries
in China would be reduced should the dollar appreciate against the Renminbi.
Until 1994, the Renminbi experienced a gradual
but significant devaluation against most major currencies, including dollars, and there was a significant devaluation of the Renminbi
on January 1, 1994 in connection with the replacement of the dual exchange rate system with a unified managed floating rate foreign
exchange system. Since 1994, the value of the Renminbi relative to the U.S. Dollar has remained stable and has appreciated slightly
against the U.S. Dollar. Countries, including the United States, have argued that the Renminbi is artificially undervalued due
to China’s current monetary policies and have pressured China to allow the Renminbi to float freely in world markets. In
July 2005, the PRC government changed its policy of pegging the value of the Renminbi to the dollar. Under the new policy the Renminbi
is permitted to fluctuate within a narrow and managed band against a basket of designated foreign currencies. While the international
reaction to the Renminbi revaluation has generally been positive, there remains significant international pressure on the PRC government
to adopt an even more flexible currency policy, which could result in further and more significant appreciation of the Renminbi
against the dollar.
Because most of our oversea sales are made in U.S. Dollars and
most of our expenses are paid in RMB, devaluation of the U.S. Dollar could negatively impact our results of operations.
The value of RMB is subject to changes in China’s
governmental policies and to international economic and political developments. In January 1994, the PRC government implemented
a unitary managed floating rate system. Under this system, the People’s Bank of China, or PBOC, began publishing a daily
Base Exchange Rate with reference primarily to the supply and demand of RMB against the U.S. Dollar and other foreign currencies
in the market during the previous day. Authorized banks and financial institutions are allowed to quote buy and sell rates for
RMB within a specified band around the central bank’s daily exchange rate. On July 21, 2005, PBOC announced an adjustment
of the exchange rate of the U.S. Dollar to RMB and modified the system by which the exchange rates are determined, which has resulted
in an appreciation of the RMB against the U.S. Dollar. During the year ended December 31, 2014, the exchange rate of the RMB to
the U.S. Dollar increased approximately 0.4% from the level at the end of December 31, 2013. While the international reaction to
the RMB revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt
an even more flexible currency policy, which could result in further fluctuations of the exchange rate of the U.S. Dollar against
the RMB, including future devaluations. Because most of our net sales are made in U.S. Dollars and most of our expenses are paid
in RMB, any future devaluation of the U.S. Dollar against the RMB could negatively impact our results of operations. Moreover,
any affirmative actions by the U.S. Government against the PRC in relation to the exchange rate could negatively impact our results
of operations.
Inflation in the PRC could negatively affect our profitability
and growth.
While the PRC economy has experienced rapid
growth, such growth has been uneven among various sectors of the economy and in different geographical areas of the country. Rapid
economic growth can lead to growth in the money supply and rising inflation. According to the National Bureau of Statistics of
China, China’s Average consumer Price Index was 2.0% in 2014. If prices for our products and services rise at a rate that
is insufficient to compensate for the rise in the costs of supplies such as raw materials, it may have an adverse effect on our
profitability.
Furthermore, In order to control inflation
in the past, the PRC government has imposed controls on bank credits, limits on loans for fixed assets and restrictions on state
bank lending. In January 2010, the Chinese government took steps to tighten the availability of credit including ordering banks
to increase the amount of reserves they hold and to reduce or limit their lending. The implementation of such policies may impede
economic growth. In October 2004, the People’s Bank of China, the PRC’s central bank, raised interest rates for the
first time in nearly a decade and indicated in a statement that the measure was prompted by inflationary concerns in the Chinese
economy. In April 2006, the People’s Bank of China raised the interest rate again. Repeated rises in interest rates by the
central bank would likely slow economic activity in China which could, in turn, materially increase our costs and also reduce demand
for our products and services.
Because our funds are held in banks which
do not provide insurance, the failure of any bank in which we deposit our funds could affect our ability to continue in business.
Banks and other financial institutions in the
PRC do not provide insurance for funds held on deposit. A significant portion of our assets are in the form of cash deposited with
banks in the PRC, and in the event of a bank failure, we may not have access to our funds on deposit. Depending upon the amount
of money we maintain in a bank that fails, our inability to have access to our cash could impair our operations, and, if we are
not able to access funds to pay suppliers, employees and other creditors, we may be unable to continue in business.
Failure to comply with the United States
Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.
As our ultimate holding company is a Delaware
corporation, we are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies
from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business.
Foreign companies, including some that may compete with us, are not subject to these prohibitions. Corruption, extortion, bribery,
pay-offs, theft and other fraudulent practices may occur from time-to-time in the PRC. We can make no assurance, however, that
our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other
agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material
adverse effect on our business, financial condition and results of operations.
If we make equity compensation grants to
persons who are PRC citizens, they may be required to register with the State Administration of Foreign Exchange of the PRC, or
SAFE. We may also face regulatory uncertainties that could restrict our ability to adopt an equity compensation plan for our directors
and employees and other parties under PRC law.
On April 6, 2007, SAFE issued the “Operating
Procedures for Administration of Domestic Individuals Participating in the Employee Stock Ownership Plan or Stock Option Plan of
An Overseas Listed Company, also known as “Circular 78.” It is not clear whether Circular 78 covers all forms of equity
compensation plans or only those which provide for the granting of stock options. For any plans which are so covered and are adopted
by a non-PRC listed company after April 6, 2007, Circular 78 requires all participants who are PRC citizens to register with and
obtain approvals from SAFE prior to their participation in the plan. In addition, Circular 78 also requires PRC citizens to register
with SAFE and make the necessary applications and filings if they participated in an overseas listed company’s covered equity
compensation plan prior to April 6, 2007. In 2008, we adopted the Highpower International, Inc. 2008 Omnibus Incentive Plan (the
“Plan”) under which we make option grants and other equity awards to our officers, directors and other eligible participants
under the plan. Circular 78 may require our officers and directors who receive option grants and are PRC citizens to register
with SAFE. We believe that the registration and approval requirements contemplated in Circular 78 will be burdensome and time consuming.
If it is determined that the Plan is subject to Circular 78, failure to comply with such provisions may subject us and participants
of the Plan who are PRC citizens to fines and legal sanctions and prevent us from being able to grant equity compensation to our
PRC employees. In that case, our ability to compensate our employees and directors through equity compensation would be hindered
and our business operations may be adversely affected. We have granted options to various employees and officers located in the
PRC. We have complied with all of the relevant regulations
imposed upon us related to such grants and assisted our grantees with their compliance with their individual registration requirements.
We have received certain preferential tax
concessions and the loss of these preferential tax concessions may cause our tax liabilities to increase and our profitability
to decline.
In China, the companies granted with National
High-tech Enterprise status enjoy 15% income tax rate. This status needs to be renewed every three years. In 2008, our operating
subsidiary, SZ Highpower received National High-tech Enterprise status, which was renewed in 2011 and recently renewed in 2014.
In 2013, SZ Springpower received the National High-tech Enterprise status. In 2014, both GZ Highpower and ICON received National
High-tech Enterprise status. The expiration of the preferential tax treatment will increase our tax liabilities and reduce our
profitability. Additionally, the PRC Enterprise Income Tax Law (the “EIT Law”) was enacted on March 16, 2007. Under
the EIT Law, which became effective on January 1, 2008, China adopted a uniform tax rate of 25% for all enterprises (including
foreign-invested enterprises) and canceled several tax incentives enjoyed by foreign-invested enterprises. However, for foreign-invested
enterprises established before the promulgation of the EIT Law, a five-year transition period is provided during which the tax
rate gradually increased starting in 2008 and will be equal to the new 25% tax rate at the end of the transition period. We believe
that our profitability will be negatively affected in the near future as a result of the new EIT Law. Any future increase in the
enterprise income tax rate applicable to us or other adverse tax treatments could increase our tax liabilities and reduce net income.
Under the EIT Law, Highpower International
and HKHTC may be classified as “resident enterprises” of China for tax purpose, which may subject Highpower International
and HKHTC to PRC income tax on taxable global income.
Under the PRC Enterprise Income Tax Law (the
“EIT Law”) and its implementing rules, both of which became effective on January 1, 2008, enterprises are classified
as resident enterprises and non-resident enterprises. An enterprise established outside of China with its “de facto management
bodies” located within China is considered a “resident enterprise,” meaning that it can be treated in a manner
similar to a Chinese domestic enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define de facto
management body as a managing body that in practice exercises “substantial and overall management and control over the production
and operations, personnel, accounting, and properties” of the enterprise. Due to the short history of the EIT Law and lack
of applicable legal precedents, it remains unclear how the PRC tax authorities will determine the PRC tax resident treatment of
a foreign company such as Highpower International and HKHTC. Both Highpower International and HKHTC’s members of management
are located in China. If the PRC tax authorities determine that Highpower International or HKHTC is a “resident enterprise”
for PRC enterprise income tax purposes, a number of PRC tax consequences could follow. First, they may be subject to the enterprise
income tax at a rate of 25% on their worldwide taxable income, including interest income on the proceeds from this offering, as
well as PRC enterprise income tax reporting obligations. Second, the EIT Law provides that dividend paid between “qualified
resident enterprises” is exempted from enterprise income tax. A recent circular issued by the State Administration of Taxation
regarding the standards used to classify certain Chinese-invested enterprises controlled by Chinese enterprises or Chinese group
enterprises and established outside of China as “resident enterprises” clarified that dividends and other income paid
by such “resident enterprises” will be considered to be PRC source income, subject to PRC withholding tax, currently
at a rate of 10%, when recognized by non-PRC shareholders. It is unclear whether the dividends that Highpower International or
HKHTC receive from SZ Highpower and SZ Springpower will constitute dividends between “qualified resident enterprises”
and would therefore qualify for tax exemption, because the definition of qualified resident enterprises is unclear and the relevant
PRC government authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that
are treated as resident enterprises for PRC enterprise income tax purposes. We are actively monitoring the possibility of “resident
enterprise” treatment for the applicable tax years and are evaluating appropriate organizational changes to avoid this treatment,
to the extent possible. As a result of the EIT Law, our historical operating results will not be indicative of our operating results
for future periods and the value of our common stock may be adversely affected.
Dividends payable by us to our foreign investors
and any gain on the sale of our shares may be subject to taxes under PRC tax laws.
If dividends payable to our shareholders are
treated as income derived from sources within China, then the dividends that shareholders receive from us, and any gain on the
sale or transfer of our shares, may be subject to taxes under PRC tax laws.
Under the EIT Law and its implementing rules,
PRC enterprise income tax at the rate of 10% is applicable to dividends payable by us to our investors that are non-resident enterprises
so long as such non-resident enterprise investors do not have an establishment or place of business in China or, despite the existence
of such establishment of place of business in China, the relevant income is not effectively connected with such establishment or
place of business in China, to the extent that such dividends have their sources within the PRC. Similarly, any gain realized on
the transfer of our shares by such investors is also subject to a 10% PRC income tax if such gain is regarded as income derived
from sources within China and Highpower International is considered as a resident enterprise which is domiciled in China for tax
purpose. Additionally, there is a possibility that the relevant PRC tax authorities may take the view that the Highpower International
and HKHTC are holding SZ Highpower and SZ Springpower, and the capital gain derived by our overseas shareholders or investors from
the share transfer is deemed China-sourced income, in which case such capital gain may be subject to a PRC withholding tax at the
rate of up to 10%. If we are required under the EIT Law to withhold PRC income tax on our dividends payable to our foreign shareholders
or investors who are non-resident enterprises, or if investors are required to pay PRC income tax on the transfer or our shares
under the circumstances mentioned above, the value of investors’ investment in our shares may be materially and adversely
affected.
In January, 2009, the State Administration
of Taxation promulgated the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident
Enterprises (“Measures”), pursuant to which, the entities which have the direct obligation to make the following payment
to a non-resident enterprise shall be the relevant tax withholders for such non-resident enterprise, and such payment includes:
incomes from equity investment (including dividends and other return on investment), interests, rents, royalties, and incomes from
assignment of property as well as other incomes subject to enterprise income tax received by non-resident enterprises in China.
Further, the Measures provides that in case of equity transfer between two non-resident enterprises which occurs outside China,
the non-resident enterprise which receives the equity transfer payment shall, by itself or engage an agent to, file tax declaration
with the PRC tax authority located at place of the PRC company whose equity has been transferred, and the PRC company whose equity
has been transferred shall assist the tax authorities to collect taxes from the relevant non-resident enterprise. However, it is
unclear whether the Measures refer to the equity transfer by a non-resident enterprise which is a direct or an indirect shareholder
of the said PRC company. Given these Measures, there is a possibility that we may have an obligation to withhold income tax in
respect of the dividends paid to non-resident enterprise investors.
Any recurrence of Severe Acute Respiratory
Syndrome (SARS), Avian Flu, or another widespread public health problem, such as the spread of H1N1 (“Swine”) Flu,
in the PRC could adversely affect our operations.
A renewed outbreak of SARS, Avian Flu or another widespread public
health problem, such as the spread of H1N1 (“Swine”) Flu, in China, where all of our operations are located and where
the substantial portion of our sales occur, could have a negative effect on our operations. Our business is dependent upon our
ability to continue to manufacture battery products. Such an outbreak could have an impact on the Company’s operations as
a result of:
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Quarantines or closures of some of our manufacturing facilities, which would severely disrupt our operations; |
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The sickness or death of our key officers and employees; and |
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A general slowdown in the Chinese economy. |
Any of the foregoing events or other unforeseeable
consequences of public health problems could adversely affect our operations.
A downturn in the economy of the PRC may slow our growth and
profitability.
The growth of the Chinese economy has been
uneven across geographic regions and economic sectors. There can be no assurance that growth of the Chinese economy will be steady
or that any downturn will not have a negative effect on our business, especially if it results in either a decreased use of our
products or in pressure on us to lower our prices.
Because our business is located in the PRC,
we may have difficulty establishing adequate management, legal and financial controls, which are required in order to comply with
U.S. securities laws.
PRC companies have historically not adopted
a western style of management and financial reporting concepts and practices, which includes strong corporate governance, internal
controls and, computer, financial and other control systems. Most of our middle and top management staff are not educated and trained
in the Western system, and we may have difficulty in hiring new employees in the PRC with such training. In addition, we may have
difficulty in hiring and retaining a sufficient number of qualified employees to work in the PRC. As a result of these factors,
we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing
financial statements, books of account and corporate records and instituting business practices that meet Western standards. Therefore,
we may, in turn, experience difficulties in implementing and maintaining adequate internal controls as required under Section 404
of the Sarbanes-Oxley Act of 2002. This may result in significant deficiencies or material weaknesses in our internal controls
which could impact the reliability of our financial statements and prevent us from complying with SEC rules and regulations and
the requirements of the Sarbanes-Oxley Act of 2002. Any such deficiencies, weaknesses or lack of compliance could have a materially
adverse effect on our business.
Investors may experience difficulties in
effecting service of legal process, enforcing foreign judgments or bringing original actions in China based upon U.S. laws, including
the federal securities laws or other foreign laws against us or our management.
Most of our current operations, including the
manufacture and distribution of our products, are conducted in China. Moreover, most of our directors and officers are nationals
and residents of China Mainland or Hong Kong. All or substantially all of the assets of these persons are located outside the United
States and in the PRC. As a result, it may not be possible to effect service of process within the United States or elsewhere outside
China upon these persons. In addition, uncertainties exist as to whether the courts of China would recognize or enforce judgments
of U.S. courts obtained against us or such officers and/or directors predicated upon the civil liability provisions of the securities
laws of the United States or any state thereof, or be competent to hear original actions brought in China against us or such persons
predicated upon the securities laws of the United States or any state thereof.
Contract drafting, interpretation and enforcement in China
involve significant uncertainties.
We have entered into numerous contracts
governed by PRC law, many of which are material to our business. As compared with contracts in the United States, contracts governed
by PRC law tend to contain less detail and are not as comprehensive in defining contracting parties’ rights and obligations.
As a result, contracts in China are more vulnerable to disputes and legal challenges. In addition, contract interpretation and
enforcement in China is not as developed as in the United States, and the result of any contract dispute is subject to significant
uncertainties. Therefore, we cannot assure that we will not be subject to disputes under our material contracts, and if such disputes
arise, we cannot assure that we will prevail.
We could be liable for damages for defects in our products
pursuant to the Tort Liability Law of the PRC
The Tort Liability Law of the People’s
Republic of China, which was passed during the 12th Session of the Standing Committee of the 11th National People’s Congress
on December 26, 2009, states that manufacturers are liable for damages caused by defects in their products and sellers are liable
for damages attributable to their fault. If the defects are caused by the fault of third parties such as the transporter or storekeeper,
manufacturers and sellers are entitled to claim for compensation from these third parties after paying the compensation amount.
RISKS RELATED TO OUR CAPITAL STRUCTURE
The price of our common stock is volatile
and investors might not be able to resell their securities at or above the price they have paid.
Since our initial public offering and
listing of our common stock in October 2007, the price at which our common stock had traded has been highly volatile, with the
lowest and highest sales price of $0.92 and $9.82, respectively. Investors might not be able to resell the shares of our common
stock at or above the price they have paid. The stock market has experienced extreme volatility that often has been unrelated
to the performance of its listed companies. Moreover, only a limited number of our shares are traded each day, which could increase
the volatility of the price of our stock. These market fluctuations might cause our stock price to fall regardless of our performance.
The market price of our common stock might fluctuate significantly in response to many factors, some of which are beyond our control,
including the following:
|
· |
Actual or anticipated fluctuations in our annual and quarterly results of operations; |
|
· |
Changes in securities analysts’ expectations; |
|
· |
Variations in our operating results, which could cause us to fail to meet analysts’ or investors’ expectations; |
|
· |
Announcements by our competitors or us of significant new products, contracts, acquisitions, strategic partnerships, joint
ventures or capital commitments; |
|
· |
Conditions and trends in our industry; |
|
· |
General market, economic, industry and political conditions; |
|
· |
Changes in market values of comparable companies; |
|
· |
Additions or departures of key personnel; |
|
· |
Stock market price and volume fluctuations attributable to inconsistent trading volume levels; and |
|
· |
Future sales of equity or debt securities, including sales which dilute existing investors. |
A few principal stockholders have significant influence
over us.
Three of our stockholders beneficially
own or control approximately 40.4% of our outstanding shares. If these stockholders were to act as a group, they would have a
controlling influence in determining the outcome of any corporate transaction or other matters submitted to our stockholders for
approval, including mergers, consolidations and the sale of all or substantially all of our assets, election of directors, and
other significant corporate actions. Such stockholders may also have the power to prevent or cause a change in control. In addition,
without the consent of these three stockholders, we could be prevented from entering into transactions that could be beneficial
to us. The interests of these three stockholders may differ from the interests of our other stockholders.
If we fail to maintain effective internal
controls over financial reporting, the price of our common stock may be adversely affected.
We are required to establish and maintain
appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls
once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations.
Any failure of these controls could also prevent us from maintaining accurate accounting records and discovering accounting errors
and financial frauds. Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment
of our internal control over financial reporting. The standards that must be met for management to assess the internal control
over financial reporting as effective are complex, and require significant documentation, testing and possible remediation to
meet the detailed standards. We may encounter problems or delays in completing activities necessary to make an assessment of our
internal control over financial reporting. In addition, the attestation process by our independent registered public accountants
is new and we may encounter problems or delays in completing the implementation of any requested improvements and receiving an
attestation of our assessment by our independent registered public accountants. If we cannot assess our internal control over
financial reporting as effective, or our independent registered public accountants are unable to provide an unqualified attestation
report on such assessment, investor confidence and share value may be negatively impacted.
In addition, management’s assessment
of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal
controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and
conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment
of our internal controls over financial reporting, or disclosure of our public accounting firm’s attestation to or report
on management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of
our common stock.
Compliance with changing regulations of corporate governance
and public disclosure will result in additional expenses.
Changing laws, regulations and standards
relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations,
have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public
markets and public reporting. Our management team will need to invest significant management time and financial resources to comply
with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses
and a diversion of management time and attention from revenue generating activities to compliance activities.
We have adopted the Highpower International,
Inc. 2008 Omnibus Incentive Plan (the “Plan”) under which we may grant securities to compensate employees and other
services providers, which could result in increased share-based compensation expenses and, therefore, reduce net income.
Under current accounting rules, we would
be required to recognize share-based compensation as compensation expense in our statement of operations, based on the fair value
of equity awards on the date of the grant, and recognize the compensation expense over the period in which the recipient is required
to provide service in exchange for the equity award. We made grants of equity awards in 2013 and 2014, and accordingly our results
of operations for the years ended December 31, 2014 and 2013 contain share-based compensation charges. If we grant equity compensation
to attract and retain key personnel, the expenses associated with share-based compensation may adversely affect our net income.
However, if we do not grant equity compensation, we may not be able to attract and retain key personnel or be forced to expend
cash or other compensation instead. Furthermore, the issuance of equity awards would dilute the stockholders’ ownership
interests in our company.
Our certificate of incorporation and
bylaws and Delaware law may have anti-takeover effects that could discourage, delay or prevent a change in control, which may
cause our stock price to decline.
Our certificate of incorporation and bylaws
and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transaction would be beneficial
to our stockholders. We are authorized to issue up to 10,000,000 shares of preferred stock. This preferred stock may be issued
in one or more series, the terms of which may be determined at the time of issuance by our board of directors without further
action by stockholders. The terms of any series of preferred stock may include voting rights (including the right to vote as a
series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights and sinking fund provisions.
No preferred stock is currently outstanding. The issuance of any preferred stock could materially adversely affect the rights
of the holders of our common stock, and therefore, reduce the value of our common stock. In particular, specific rights granted
to future holders of preferred stock could be used to restrict our ability to merge with, or sell our assets to, a third party
and thereby preserve control by the present management.
Provisions of our certificate of incorporation
and bylaws and Delaware law also could have the effect of discouraging potential acquisition proposals or making a tender offer
or delaying or preventing a change in control, including changes a stockholder might consider favorable. Such provisions may also
prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the certificate of incorporation
and bylaws and Delaware law, as applicable, among other things:
|
· |
provide the board of directors with the ability to alter the bylaws without stockholder approval; |
|
· |
place limitations on the removal of directors; and |
|
· |
provide that vacancies on the board of directors may be filled by a majority of directors in office,
although less than a quorum. |
We are also subject to Section 203 of
the Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between
a publicly-held Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder
who becomes a beneficial owner of 15% or more of a Delaware corporation’s voting stock for a three-year period following
the date that such stockholder became an interested stockholder.
We do not foresee paying cash dividends in the foreseeable
future and, as a result, our investors’ sole source of gain, if any, will depend on capital appreciation, if any.
We do not plan to declare or pay any cash
dividends on our shares of common stock in the foreseeable future and currently intend to retain any future earnings for funding
growth. As a result, Investors should not rely on an investment in our securities if they require the investment to produce dividend
income. Capital appreciation, if any, of our shares may be investors’ sole source of gain for the foreseeable future. Moreover,
investors may not be able to resell their shares in our company at or above the price they paid for them.
ITEM 1B.UNRESOLVED STAFF COMMENTS
Not applicable to smaller reporting companies.
ITEM 2. PROPERTIES
HKHTC’s registered office is located
in Hong Kong at Unit 12, 15/F, Technology Park, 18 On Lai Street, ShekMun, Shatin, N.T. Hong Kong.
The Company currently has five
active manufacturing operations located in mainland China at 68 Xinxia Street, Pinghu, Longgang, Shenzhen, Guangdong,
518111,China; Building A, Chaoshun Industrial Zone, Renming Road, Danhu Community, GuangLan Street, Baoan District, Shenzhen,
Guangdong, 518111, China; and Guanlan Hi-tech Park, South Road around Guanlan, Guanglan Street, Baoan District, Shenzhen,
Guangdong, 518111, China. Our active facilities cover approximately 55,680 square meters in Shenzhen and 126,605 square
meters facility in Huizhou to which machinery is currently being deployed), and consist of manufacturing plants, dormitories
and research and development facilities. We lease manufacturing facilities from various landlords under a total of thirteen
leases with varying terms ranging, which are renewed upon expiration. All leases have been fully prepaid until the expiration
date. The table below lists the locations, approximate square meters, principal use and lease expiration dates of the
facilities used in our manufacturing operations as of December 31, 2014.
Location |
|
Area
(square meters) |
|
Principal Use |
|
Lease
expiration date |
|
|
|
|
|
|
|
Building A1, 68 Xinxia Street, Pinghu, Longgang District, Shenzhen, Guangdong |
|
3,300 |
|
Industry & Residence |
|
December 31, 2016 |
|
|
|
|
|
|
|
Building A2, Luo Shan Industrial Zone, Shanxia Community, Pinghu Street, Longgang District, Shenzhen, Guangdong |
|
4,922 |
|
Industry & Residence |
|
December 31, 2016 |
|
|
|
|
|
|
|
Building A1&A2&A3&A4&A7, Luo Shan Industrial
Zone, Shanxia Community, Pinghu Street, Longgang District, Shenzhen, Guangdong
|
|
12,608 |
|
Staff Dormitory |
|
December 31, 2016 |
Building A3&A4&A7, Luo Shan Industrial Zone,
Shanxia Community, Pinghu Street, Longgang District, Shenzhen, Guangdong
|
|
14,702 |
|
Industry |
|
December 31, 2016 |
Building A,Chaoshun Industrial Zone, Renming Road,
Danhu Community, Guanglan Street, Baoan District, Shenzhen, Guangdong
|
|
9,460 |
|
Industry |
|
September 15, 2017 |
Building A, Chaoshun Industrial Zone, Renming Road,
Danhu Community, Guanglan Street, Baoan District, Shenzhen, Guangdong
|
|
4,140 |
|
Staff Dormitory |
|
September 15, 2017 |
Guanlan Hi-tech Park, South Road around Guanlan, Guanglan Street, Baoan District, Shenzhen, Guangdong |
|
6,548 |
|
Industry & Dormitory |
|
June 30, 2015 |
In China, only the PRC government and
peasant collectives may own land. In February 2007, the Company acquired approximately 126,605 square meters of land equity in
Industry Development Zone, New Lake, Maan Town, Huicheng District, Huizhou, Guangdong, China for a total of RMB21 million ($3,505,921)
under land use right grant from the Huizhou State-Owned Land Resource Bureau that gave us the right to use the land for 50 years
and an agreement with the government of Maan Town. In the event we wish to continue to use the land after the 50-year period,
we must apply for an extension at least one year prior to the land grant’s expiration.
Our rights with respect to the land use
right grant permit us to develop the land and construct buildings for industrial applications. We have the right to transfer or
rent the land and use it as collateral for our loans.
In February 2012, we acquired 58,669 square
meters of land equity in Ganzhou, Jiangxi province, China for a total of RMB8,377,067($1,367,729) under land use right grant from
the Ganzhou Land and Resource Bureau that gives us the right to use the land for 50 years. Our rights with respect to the land
use right grant permit us to develop the land and construct buildings for industrial applications. We have the right to transfer
or rent the land and use it as collateral for our loans. In 2014, we completed construction of our materials recycling factory
in Ganzhou, Jiangxi Province, PRC.
Our Ni-MH manufacturing capacity is approximately
15 million units per month. Our run rate is approximately 13 million units per month. Our lithium battery production is almost
at 100% capacity now at our Springpower facility and HZ HTC facility, with manufacturing capacity of approximately 6.0 million
units per month. We are also planning for moderate manufacturing capacity growth of approximately 30-40% for the lithium
battery segment in the next 12 months at Huizhou facility. The source of funding for such expansion will be our operational
cash and bank credit facilities, as we still have unused credit totaling approximately $22.6 million.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON
STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock trades on the NASDAQ Global Market under the
stock symbol “HPJ.”
The following table summarizes the highest and lowest sales
prices of our common stock during the quarters listed below as reported by the NASDAQ:
| |
Highest | | |
Lowest | |
Year ended December 31, 2014 | |
| | | |
| | |
First Quarter | |
$ | 6.06 | | |
$ | 2.46 | |
Second Quarter | |
$ | 6.86 | | |
$ | 3.15 | |
Third Quarter | |
$ | 7.94 | | |
$ | 4.38 | |
Fourth Quarter | |
$ | 7.43 | | |
$ | 4.54 | |
| |
| | | |
| | |
Year ended December 31, 2013 | |
| | | |
| | |
First Quarter | |
$ | 1.19 | | |
$ | 0.94 | |
Second Quarter | |
$ | 1.28 | | |
$ | 0.97 | |
Third Quarter | |
$ | 1.49 | | |
$ | 0.98 | |
Fourth Quarter | |
$ | 3.17 | | |
$ | 1.32 | |
The stock market in general has experienced
extreme stock price fluctuations in the past few years. In some cases, these fluctuations have been unrelated to the operating
performance of the affected companies. Many companies have experienced dramatic volatility in the market prices of their common
stock. We believe that a number of factors, both within and outside our control, could cause the price of our common stock to
fluctuate, perhaps substantially. Factors such as the following could have a significant adverse impact on the market price of
our common stock:
|
· |
Our financial position and results of operations; |
|
· |
Our ability to obtain additional financing and, if available, the terms and conditions of the financing; |
|
· |
Concern as to, or other evidence of, the reliability and efficiency of our proposed products or our
competitors’ products; |
|
· |
Announcements of innovations or new products by us or our competitors; |
|
· |
Federal and state governmental regulatory actions and the impact of such requirements on our business; |
|
· |
The development of litigation against us; |
|
· |
Period-to-period fluctuations in our operating results; |
|
· |
Changes in estimates of our performance by any securities analysts; |
|
· |
The issuance of new equity securities pursuant to a future offering or acquisition; |
|
· |
Changes in interest rates; |
|
· |
Competitive developments, including announcements by competitors of new products or significant contracts,
acquisitions, strategic partnerships, joint ventures or capital commitments; |
|
· |
Investor perceptions of our company; and |
|
· |
General economic and other national conditions. |
Stockholders
As of March 30, 2015, we had 24 stockholders
of record. This number does not include an indeterminate number of stockholders whose shares are held by brokers in street name.
Dividends
We do not expect to declare or pay any
cash dividends on our common stock in the foreseeable future, and we currently intend to retain future earnings, if any, to finance
the expansion of our business. The decision whether to pay cash dividends on our common stock will be made by our board of directors,
at its discretion, and will depend on our financial condition, operating results, capital requirements and other factors that
the board of directors considers significant.
We did not pay cash dividends in the years ended December 31,
2014 or 2013.
Transfer Agent
The transfer agent and registrar for our common stock is Corporate
Stock Transfer, Inc.
Equity Compensation Plan Information
Our equity compensation plan information is provided as set
forth in Part III, Item 11 herein.
Additional Information
Copies of our annual reports, quarterly
reports, current reports, and any amendments to those reports, are available free of charge on the Internet at www.sec.gov. All
statements made in any of our filings, including all forward-looking statements, are made as of the date of the document, in which
the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless
we are required to do so by law.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Not applicable for a smaller reporting
company.
ITEM 7. MANAGEMENT’S DISCUSSION
AND ANALYSIS AND RESULTS OF OPERATIONS
Forward-Looking Statements
The following discussion should be
read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. This report
contains forward-looking statements. The words “anticipated,” “believe,” “expect, “plan,”
“intend,” “seek,” “estimate,” “project,” “could,” “may,”
and similar expressions are intended to identify forward-looking statements. These statements include, among others, information
regarding future operations, future capital expenditures, and future net cash flows. Such statements reflect our management’s
current views with respect to future events and financial performance and involve risks and uncertainties, including, without
limitation, general economic and business conditions, changes in foreign, political, social, and economic conditions, regulatory
initiatives and compliance with governmental regulations, the ability to achieve further market penetration and additional customers,
and various other matters, many of which are beyond our control. Our actual results could differ materially from those anticipated
in these forward-looking statements, which are subject to a number of risks, uncertainties and assumptions described in the “Risk
Factors” section and elsewhere in this report. Consequently, all of the forward-looking statements made in this report
are qualified by these cautionary statements and there can be no assurance of the actual results or developments.
Overview
Highpower International was incorporated
in the state of Delaware on January 3, 2006 and originally organized as a “blank check” shell company to investigate
and acquire a target company or business seeking the perceived advantages of being a publicly held corporation. On November 2,
2007, we closed a share exchange transaction, pursuant to which we (i) became the 100% parent of HKHTC and its wholly-owned subsidiary,
SZ Highpower, (ii) assumed the operations of HKHTC and its subsidiary and (iii) changed our name to Hong Kong Highpower Technology,
Inc. We subsequently changed our name to Highpower International, Inc. in October 2010.
HKHTC was incorporated in Hong Kong
in 2003 under the Companies Ordinance of Hong Kong. HKHTC formed HZ Highpower and SZ Springpower in 2008. On October 8,
2013, SZ Springpower further increased its registered capital to $15,000,000. SZ Highpower holds 69.97% of the equity
interest of SZ Springpower, and HKHTC holds the remaining 30.03%.HZ In February 2011, HKHTC formed another wholly-owned
subsidiary, Icon Energy System Company Limited, a company organized under the laws of the PRC, which commenced operations in
July 2011.
SZ Highpower was founded in 2001 in the
PRC. SZ Highpower formed GZ Highpower in September 2010. On November 13, 2014, GZ Highpower increased its paid-in capital
from RMB 30,000,000 ($4,898,119) to RMB 40,000,000 ($6,437,473) by SZ Highpoewer. SZ Highpower holds 70% of the equity interest
of GZ Highpower, and the four founding management members of GZ Highpower hold the remaining 30%. SZ Highpower formed HZ HTC in
March 2012, which engages in the manufacture of batteries.
Through SZ Highpower, we manufacture Ni-MH
batteries for both consumer and industrial applications. We have developed significant expertise in Ni-MH battery technology and
large-scale manufacturing that enables us to improve the quality of our battery products, reduce costs, and keep pace with evolving
industry standards. In 2008, we commenced manufacturing two lines of Lithium-Ion (“lithium”) and Lithium polymer rechargeable
batteries through SZ Springpower for higher-end, high-performance applications, such as laptops, digital cameras and wireless
communication products. Our automated machinery allows us to process key aspects of the manufacturing process to ensure high
uniformity and precision, while leaving the non-key aspects of the manufacturing process to manual labor.
We employ a broad network of salespersons
in China Mainland and Hong Kong, which target key customers by arranging in-person sales presentations and providing post-sale
services. The sales staff works with our customers to better address customers’ needs.
Critical Accounting Policies, Estimates and Assumptions
The Securities and Exchange Commission (“SEC”)
defines critical accounting policies as those that are, in management's view, most important to the portrayal of our financial
condition and results of operations and those that require significant judgments and estimates.
The preparation of these consolidated
financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses, as well as the disclosure of contingent assets and liabilities at the date of financial statements. We
base our estimates on historical experience, actuarial valuations and various other factors that we believe to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Some of those judgments can be subjective and complex and, consequently, actual
results may differ from these estimates under different assumptions or conditions. While for any given estimate or assumption
made by our management there may be other estimates or assumptions that are reasonable, we believe that, given the current facts
and circumstances, it is unlikely that applying any such other reasonable estimate or assumption would materially impact the financial
statements. The accounting principles we utilized in preparing our consolidated financial statements conform in all material respects
to generally accepted accounting principles in the United States of America.
Use of Estimates. The
preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
periods. Significant items subject to such estimates and assumptions include, but are not limited to, revenues; the allowance
for doubtful receivables; recoverability of the carrying amount of inventory; fair values of financial instruments; and the
assessment of deferred tax assets or liabilities. These estimates are often based on complex judgments and assumptions that
management believes to be reasonable but are inherently uncertain and unpredictable. Actual results could differ from these
estimates.
Accounts Receivable. Accounts
receivable are stated at original amount less an allowance made for doubtful receivables, if any, based on a review of all outstanding
amounts at the period end. An allowance is also made when there is objective evidence that the Company will not be able to collect
all amounts due according to the original terms of receivables. Bad debts are written off when identified. The Company extends
unsecured credit to customers in the normal course of business and believes all accounts receivable in excess of the allowances
for doubtful receivables to be fully collectible. The Company does not accrue interest on trade accounts receivable.
Revenue Recognition. The
Company recognizes revenue when persuasive evidence of an arrangement exists, the sales price is fixed or determinable, delivery
of the product has occurred, title and risk of loss have transferred to the customers and collectability of the receivable is
reasonably assured. The majority of domestic sales contracts transfer title and risk of loss to customers upon receipt. The majority
of oversea sales contracts transfer title and risk of loss to customers when goods were delivered to the carriers. Revenue is
presented net of any sales tax and value added tax.
The Company does not have arrangements
for returns from customers and does not have any future obligations directly or indirectly related to product resale by customers.
The Company has no sales incentive programs.
Inventories. Inventories are stated at the lower
of cost or market value. Costs are determined on a weighted-average method. Inventory includes raw materials, packing materials,
work-in-progress, consumables and finished goods. The variable production overhead is allocated to each unit of production on
the basis of the actual use of the production facilities. The allocation of fixed production overhead to the costs of conversion
is based on the normal capacity of the production facilities.
Income Taxes. The Company
recognizes deferred assets and liabilities for the expected future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred income taxes are recognized for the consequences in future years of differences
between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax
laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
Foreign Currency Translation and Transactions.
Highpower International’s functional currency is the United States dollar ("US$"). HKHTC's functional currency
is the Hong Kong dollar ("HK$"). The functional currency of the Company’s subsidiaries in the PRC is the Renminbi
(“RMB”).
At the date a foreign currency transaction
is recognized, each asset, liability, revenue, expense, gain, or loss arising from the transaction is measured initially in the
functional currency of the recording entity by use of the exchange rate in effect at that date. The increase or decrease in expected
functional currency cash flows upon settlement of a transaction resulting from a change in exchange rates between the functional
currency and the currency in which the transaction is denominated is recognized as foreign currency transaction gain or loss that
is included in determining net income for the period in which the exchange rate changes. At each balance sheet date, recorded
balances that are denominated in a foreign currency are adjusted to reflect the current exchange rate.
The Company’s reporting currency
is the US$. Assets and liabilities of HKHTC and the PRC subsidiaries are translated at the current exchange rate at the balance
sheet dates, revenues and expenses are translated at the average exchange rates during the reporting periods, and equity accounts
are translated at historical rates. Translation adjustments are reported in other comprehensive income.
Results of Operations
The following table sets forth the consolidated
statements of operations of the Company for the years ended December 31, 2014 and 2013, both in dollars and as a percentage of
net sales.
Consolidated Statements of Operations | |
Year Ended December 31, | |
| |
2014 | | |
| | |
2013 | | |
| |
| |
(in thousands except share and per share
information) | |
| |
| | |
| | |
| | |
| |
Net Sales | |
| 147,088 | | |
| 100.0 | % | |
| 132,850 | | |
| 100.0 | % |
| |
| | | |
| | | |
| | | |
| | |
Cost of Sales | |
| (116,937 | ) | |
| (79.5 | )% | |
| (106,466 | ) | |
| (80.1 | )% |
| |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| 30,151 | | |
| 20.5 | % | |
| 26,384 | | |
| 19.9 | % |
| |
| | | |
| | | |
| | | |
| | |
Research and development expenses | |
| (7,710 | ) | |
| (5.2 | )% | |
| (5,711 | ) | |
| (4.3 | )% |
| |
| | | |
| | | |
| | | |
| | |
Selling and distribution expenses | |
| (6,552 | ) | |
| (4.5 | )% | |
| (6,188 | ) | |
| (4.7 | )% |
| |
| | | |
| | | |
| | | |
| | |
General and administrative expenses including share-based
compensation | |
| (12,893 | ) | |
| (8.8 | )% | |
| (12,093 | ) | |
| (9.1 | )% |
| |
| | | |
| | | |
| | | |
| | |
Loss on exchange rate difference | |
| 274 | | |
| 0.2 | % | |
| (553 | ) | |
| (0.4 | )% |
| |
| | | |
| | | |
| | | |
| | |
Gain on derivative instruments | |
| (54 | ) | |
| | * | |
| 326 | | |
| 0.2 | % |
| |
| | | |
| | | |
| | | |
| | |
Income from operations | |
| 3,216 | | |
| 2.2 | % | |
| 2,165 | | |
| 1.6 | % |
| |
| | | |
| | | |
| | | |
| | |
Gain on fair value of warrant liability | |
| 106 | | |
| 0.1 | % | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Other income | |
| 1,707 | | |
| 1.2 | % | |
| 1,539 | | |
| 1.2 | % |
| |
| | | |
| | | |
| | | |
| | |
Interest expenses | |
| (1,838 | ) | |
| (1.2 | )% | |
| (1,647 | ) | |
| (1.2 | )% |
| |
| | | |
| | | |
| | | |
| | |
Income before tax | |
| 3,191 | | |
| 2.2 | % | |
| 2,057 | | |
| 1.5 | % |
| |
| | | |
| | | |
| | | |
| | |
Income tax expense | |
| (590 | ) | |
| (0.4 | )% | |
| (718 | ) | |
| 0.5 | % |
| |
| | | |
| | | |
| | | |
| | |
Net income | |
| 2,601 | | |
| 1.8 | % | |
| 1,339 | | |
| 1.0 | % |
| |
| | | |
| | | |
| | | |
| | |
Less: loss attributable to non-controlling interest | |
| (152 | ) | |
| (0.1 | )% | |
| (112 | ) | |
| (0.1 | )% |
Net income attributable to the company | |
| 2,753 | | |
| 1.9 | % | |
| 1,451 | | |
| 1.1 | % |
| |
| | | |
| | | |
| | | |
| | |
Income per common share | |
| | | |
| | | |
| | | |
| | |
- Basic | |
| 0.19 | | |
| | | |
| 0.11 | | |
| | |
-Diluted | |
| 0.18 | | |
| | | |
| 0.11 | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common shares outstanding | |
| | | |
| | | |
| | | |
| | |
-Basic | |
| 14,739,073 | | |
| | | |
| 13,671,169 | | |
| | |
-Diluted | |
| 15,154,239 | | |
| | | |
| 13,687,698 | | |
| | |
Dividends declared per common share | |
| - | | |
| | | |
| - | | |
| | |
*Less than 0.1%
Years ended December 31, 2014 and 2013
Net sales for the year ended December
31, 2014 were $147.1 million compared to $132.8 million for the year ended December 31, 2013, an increase of $14.2 million, or
10.7%. The increase was due to a $10.5 million increase in net sales of our lithium batteries (resulting from a 19.5% increase
in the volume of batteries per ampere hour sold which was partly offset a 1.1% decrease in the average selling price of such batteries)
and a $2.1 million increase in net sales of our Ni-MH batteries (resulting from a 9.6% increase in the number of Ni-MH battery
units sold which was partly offset a 6.2% decrease in the average selling price of such batteries) and a $1.7 million increase
in revenue from our new material business. The increase in the number of Ni-MH battery units sold in 2014 was primarily attributable
to increased orders from our new customers and the increase in the volume of lithium batteries sold in 2014 was primarily attributable
to increased orders from our new and existing customers due to the growth in global demand for lithium batteries.
Cost of sales mainly consists of nickel,
cobalt, lithium derived materials, labor, and overhead. Cost of sales were $116.9 million for the year ended December 31, 2014
as compared to $106.5 million for the comparable period in 2013. As a percentage of net sales, cost of sales decreased to 79.5%
for the year ended December 31, 2014 compared to 80.1% for the comparable period in 2013. This decrease was attributable to improved
manufacturing efficiency along with the increase of production automation.
Gross profit for the year ended December
31, 2014 was $30.2 million, or 20.5% of net sales, compared to $26.4 million, or 19.9% of net sales, respectively, for the comparable
period in 2013. Management considers gross profit to be a key performance indicator in managing our business. Gross profit margins
are usually a factor of cost of sales, product mix and demand for products. This increase was attributable to improved manufacturing
efficiency along with the increase of production automation.
To cope with pressure on our gross margins
we control production costs by preparing budgets for each department and comparing actual costs with our budgeted figures monthly
and quarterly. Additionally, we have reorganized the Company’s production structure and have focused more attention on employee
training to enhance efficiency. We also intend to expand our market share by investing in greater promotion of our products in
regions such as the U.S., Russia, Europe and India, and by expanding our sales team with more experienced sales personnel. We
have also begun production capacity expansion for our lithium batteries business as to take advantage of the strong demand globally.
Research and development expenses
were $7.7 million, or 5.2% of net sales, for the year ended December 31, 2014, as compared to $5.7 million, or 4.3% of net
sales, for the comparable period in 2013. The increase of 35.0% was due to R&D activities in high end power batteries and
systems in transportation and industrial energy storage areas, and the expansion of our workforce to improve research in
basic materials and electrochemical system to increase battery energy density such as high voltage and silicon anode
technologies, and fast charge performance, etc.
Selling and distribution expenses
were $6.6 million, or 4.5% of net sales, for the year ended December 31, 2014 compared to $6.2 million, or 4.7% of net
sales, for the comparable period in 2013, an increase of 5.9%. Selling and distribution expenses increased due to the
expansion of our increased sales and marketing activities, including participation in industry trade shows and international
travels to promote and sell our products abroad.
General and administrative expenses were
$12.9 million, or 8.8% of net sales, for the year ended December 31, 2014, compared to $12.1 million, or 9.1% of net sales, for
the comparable period in 2013. The increase was mainly due to the increase of $859,137 in share based compensation.
We experienced a gain of $273,900 on the
exchange rate difference between the U.S. Dollar and the RMB in the year ended December 31, 2014, and a loss of $552,669 on the
exchange rate difference between the U.S. Dollar and the RMB in the year ended December 31, 2013. The gain in exchange rate difference
was due to the depreciation of the RMB relative to the U.S. Dollar over the respective periods.
We experienced a loss on derivative instruments
of approximately $54,406 in the year ended December 31, 2014, which included a gain of $8,395 on settled currency forwards, and
a loss of $62,801 on fair value change of unsettled currency forwards, as compared to a gain of $326,222 for the comparable period
in 2013, which included a gain of $519,750on settled currency forwards and a loss of $193,528 on unsettled currency forwards.
Interest expense was $1.8 million for
the year ended December 31, 2014, as compared to $1.6 million for the respective comparable period in 2013. The change was $191,000
due to an increase in bank borrowings.
Other income, which consists of bank
interest income, government grants and sundry income, was $1.7 million for the year ended December 31, 2014, as compared to
$1.5 million for the year ended December 31, 2013, an increase of $168,998. The increase was mainly due to an increase of
$160,737 in bank interest income.
Gain on fair value change of warrant liabilities
was $106,287 for the year ended December 31, 2014, as compared to $nil million for the year ended December 31, 2013. It represented
the fair value change of 500,001 shares of warrants issued on April 17, 2014.
During the year ended December 31, 2014,
we recorded a provision for income tax expense of $590,318, as compared to $718,016 for the comparable period in 2013. The decrease
was due to the decrease of the income tax rate.
Net income attributable to the Company
(excluding net loss attributable to non-controlling interest) for the year ended December 31, 2014 was $2.8 million compared to
net income attributable to the Company (excluding net loss attributable to non-controlling interest) of $1.5 million for the comparable
period in 2013.
Liquidity and Capital Resources
We had cash and cash equivalents of approximately
$14.6 million as of December 31, 2014, as compared to $8.0 million as of December 31, 2013. Our funds are kept in financial institutions
located in the PRC, which do not provide insurance for amounts on deposit. Moreover, we are subject to the regulations of
the PRC which restrict the transfer of cash from the PRC, except under certain specific circumstances. Accordingly, such funds
may not be readily available to us to satisfy obligations which have been incurred outside the PRC.
In 2013, we completed the construction
of our large scale lithium battery production facility in Huizhou. The Company has been leveraging from various Chinese banks
to fund our expansion to meet the demand from the fast growing lithium battery market in mobile and portable consumer devices,
vehicles of various sizes, and energy storage systems. As of December 31, 2014, we had in place general banking facilities with
eight financial institutions aggregating $62.1 million. The maturity of these facilities is generally within one year. The facilities
are subject to annual review and approval. Certain of these banking facilities are guaranteed by our Chief Executive Officer,
Mr. Dang Yu Pan, and contain customary affirmative and negative covenants for secured credit facilities of this type. However,
these covenants do not have any impact on our ability to undertake additional debt or equity financing. Interest rates are generally
based on the banks’ reference lending rates. No significant commitment fees are required to be paid for the banking facilities.
As of December 31, 2014, we had utilized approximately $39.5 million under such general credit facilities and had available unused
credit facilities of $22.6 million. The Company’s debt asset ratio reached 71.4% as of December 31, 2014, which decreased
by 5.7% as compared to a debt asset ratio of 77.1% as of December 31, 2013.
The management of the Company has taken
and will take a number of actions and will continue to address our high debt level in order to restore the Company to a sound
financial structure with an appropriate business strategy going forward. These actions can include marketing more higher-margin
lithium battery products and systems; controlling cost in operating expenses by improving management efficiency; and stock sales
to strategic investors.
We believe that our existing balances
of cash and cash equivalents and amounts expected to be provided by operating activities and stock sales will provide us with
sufficient financial resources to meet our cash requirements for operations, working capital, and capital expenditures for the
next twelve months.
However, in the event of unforeseen circumstances, unfavorable
market developments or unfavorable results from operations, there can be no assurance that the above actions could be successfully
implemented as expected, and cash flows may be adversely affected.
For the year ended December 31, 2014,
net cash provided by operating activities was approximately $15.1 million, as compared to net cash provided by operating
activities of $9.4 million for the comparable period in 2013. The net cash increase of $5.7 million provided by operating
activities is primarily attributable to, among other items, an increase of $1.3 million in cash inflow of net income, an
increase of $10.0 million in cash inflow of accounts receivable, a decrease of $3.3 million in outflow of prepayments, which
was significantly offset by an increase of approximately $8.9 million in outflow of accounts payable, an increase of $5.0
million in outflow of other payables and accrued liabilities The cash inflow increases in accounts receivable was, to a great
extent, attributable to increase in net sales.
Net cash used in investing activities
was $8.9 million for the year ended December 31, 2014 compared to $20.0 million for the comparable period in 2013. The net decrease
of $11.1 million of cash used in investing activities was primarily attributable to a decrease in cash outflow from acquisition
of plant and equipment for our strategic change.
Net cash used in financing activities
was $335,310 for the year ended December 31, 2014 as compared to net cash provided by financing activities of $11.4 million
for the comparable period in 2013. The net decrease of $11.7 million cash provided by financing activities was primarily attributable
to a decrease of $13.7 million in proceeds from short-term bank loans, an increase of $22.4 million in repayment of short-term
bank loans, which was partly offset by an increase of $7.0 million in proceeds from notes payable, an increase of $4.6 million
proceeds from issuance of capital stock, net, an increase of $13.4 million in restricted cash.
For fiscal year 2014 and 2013, our inventory
turnover was 5.6 and 5.8 times, respectively. The average days outstanding of our accounts receivable at December 31, 2014 was
81 days, as compared to 80 days at December 31, 2013. Inventory turnover and average days outstanding of accounts receivables
are key operating measures that management relies on to monitor our business.
We are required to contribute a portion
of our employees’ total salaries to the Chinese government’s social insurance funds, including retirement pension,
medical insurance, unemployment insurance and job injuries insurance, and a housing assistance fund, in accordance with relevant
regulations. We expect these contributions will contribute to administrative and other operating expenses in an amount of approximately
$124,094 per month based on the size of our current workforce. We expect the amount of our contribution to the government’s
social insurance funds to increase in the future as we expand our workforce and operations.
Based upon our present plans, we believe
that cash on hand, cash flows from operations and funds available under our bank facilities will be sufficient to fund our capital
needs for the next 12 months. However, our ability to maintain sufficient liquidity depends partially on our ability to achieve
anticipated levels of revenue, while continuing to control costs. If we did not have sufficient available cash, we would have
to seek additional debt or equity financing through other external sources, which may not be available on acceptable terms, or
at all. Failure to maintain financing arrangements on acceptable terms would have a material adverse effect on our business, results
of operations and financial condition.
The use of working capital is primarily
for the maintenance of our accounts receivable and inventory. We provide our major customers with payment terms ranging from 30
to 90 days. Additionally, our production lead time is approximately 30 to 40 days, from the inspection of incoming materials,
to production, testing and packaging. We need to keep a large supply of raw materials and work in process and finished goods inventory
on hand to ensure timely delivery of our products to our customers. We use two methods to support our working capital needs: (i)
paying our suppliers under payment terms ranging from 60 to 120 days; and (ii) using short-term bank loans. We use accounts receivable
as collateral for our loans. Upon receiving payment for accounts receivable, we pay our short-term loans. Our working capital
management practices are designed to ensure that we maintain sufficient working capital.
Guarantees of Bank Loans
Mr. Dang Yu Pan, our Chairman and Chief
Executive Officer, and his wife, Ms. Zhou Tao Yin, and Mr. Wen Liang Li, our Vice President, have provided personal guarantees
under certain of our outstanding banking facilities. The following table shows the amount outstanding on each of our bank loans
as of December 31, 2014 and the guarantors of each loan:
Name of Bank | |
Amount Granted | | |
Unused line of
credit | | |
Maturity date | |
Guaranteed by |
Bank of China | |
$ | 12,653,474 | | |
$ | 424,823 | | |
3/10/2015 | |
Dang Yu Pan |
Bank of China | |
$ | 3,965,144 | | |
$ | 67,516 | | |
7/23/2015 | |
Dang Yu Pan, Wen Liang Li |
Ping An Bank Co., Ltd | |
$ | 11,428,945 | | |
$ | 295,818 | | |
10/19/2015 | |
Dang Yu Pan |
China Minsheng Banking Corp., LTD | |
$ | 3,265,413 | | |
$ | - | | |
5/22/2015 | |
Dang Yu Pan |
Shenzhen Baoan Guiyin County Bank | |
$ | 4,734,848 | | |
$ | 1,750,151 | | |
11/18/2015 | |
Dang Yu Pan |
Industrial and Commercial Bank of China | |
$ | 6,530,826 | | |
$ | 3,918,496 | | |
7/25/2015 | |
Dang Yu Pan |
China Citic Bank | |
$ | 8,046,910 | | |
$ | 6,788,093 | | |
6/25/2015 | |
Dang Yu Pan |
Industrial Bank Co., Ltd | |
$ | 6,530,825 | | |
$ | 4,430,636 | | |
10/23/2015 | |
Dang Yu Pan |
Jiang Su Bank Co., Ltd | |
$ | 4,898,119 | | |
$ | 4,898,119 | | |
9/11/2015 | |
Dang Yu Pan, Zhou Tao Yin |
Total: | |
$ | 62,054,504 | | |
$ | 22,573,652 | | |
| |
|
We did not and do not intend to pay any
compensation to the guarantor for the guarantees.
Inflation and Seasonality
Inflation has not had a significant
impact on our operations during the last two fiscal years. However, the volatile nickel prices affect our cost of sales
constantly. In times of economic downturn, nickel prices tend to decline, and our gross margin tends to be higher than the
periods when of economy growth, which usually brings higher metal prices. The price of nickel was volatile during 2013 and
2014 and could be volatile again. The price of nickel decreased 20% from January 2013 to December 2013, and the price of
nickel rose 14.0% from January 2014 to December 2014.
The first quarter of each fiscal year
tends to be our slow season due to the Chinese New Year holidays. Our factories and operations usually shut down for 1-2 weeks
during this time, resulting in lower sales during the first quarter.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet debt,
nor do we have any transactions, arrangements or relationships with any special purpose entities.
ITEM 7A. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Credit Risk
We are exposed to credit risk from our
cash at bank, fixed deposits and contract receivables. The credit risk on cash at bank and fixed deposits is limited because the
counterparts are recognized financial institutions. Contract receivables are subject to credit evaluations. We periodically record
a provision for doubtful collections based on an evaluation of the collectability of contract receivables by assessing, among
other factors, the customer’s willingness or ability to pay, repayment history, general economic conditions and our ongoing
relationship with the customers.
Foreign Currency and Exchange Risk
Though the reporting currency is the US$,
the Company maintains its financial records in the functional currency of Renminbi (“RMB”). Substantially all of our
operations are conducted in the PRC and we pay the majority of expenses in RMB. Approximately 60% of our sales are made in U.S.
Dollars. During the year ended December 31, 2014, the exchange rate of the RMB to the U.S. Dollar depreciated approximately 0.4%
from the level at the end of December 31, 2013. Future appreciation of the RMB against the U.S. Dollar would increase our costs
when translated into U.S. Dollars and could adversely affect our margins unless we make sufficient offsetting sales. Conversion
of RMB into foreign currencies is regulated by the People’s Bank of China through a unified floating exchange rate system.
Although the PRC government has stated its intention to support the value of the RMB, there can be no assurance that such exchange
rate will not continue to appreciate significantly against the U.S. Dollar. Exchange rate fluctuations may also affect the value,
in U.S. Dollar terms, of our net assets. In addition, the RMB is not freely convertible into foreign currency and all foreign
exchange transactions must take place through authorized institutions. Due to the volatility of the US Dollar to our functional
currency the Company put into place a hedging program to attempt to protect it from significant changes to the US Dollar which
affects the value of its US dollar receivables and sales. As of December 31, 2014, the Company had no series of currency forwards.
Changes in the fair value of these derivative contracts are recorded in earnings to offset the impact of loss on derivative instruments.
The net losses of $54,406 attributable to these activities are included in “loss of derivative instruments” for the
year ended December 31, 2014. The net gains of $326,222 attributable to these activities are included in “gain of derivative
instruments” for the year ended December 31, 2013.
Country Risk
The substantial portion of our business,
assets and operations are located and conducted in Hong Kong and China Mainland. While these economies have experienced significant
growth in the past twenty years, growth has been uneven, both geographically and among various sectors of the economy. The Chinese
government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these
measures benefit the overall economy of Hong Kong and China Mainland, but may also have a negative effect on Highpower International.
For example, Highpower International’s operating results and financial condition may be adversely affected by government
control over capital investments or changes in tax regulations applicable to Highpower International. If there are any changes
in any policies by the Chinese government and Highpower International’s business is negatively affected as a result, then
Highpower International’s financial results, including our ability to generate revenues and profits, will also be negatively
affected.
ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
The information required by this Item
8 is incorporated in this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls
and procedures
Disclosure controls and procedures are
internal controls and other internal audit procedures that are designed and adopted by management to ensure that information required
to be disclosed by us in the reports that we file or submit under the Security Exchange Act 1934 is properly recorded, processed,
summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and regulations.
Disclosure controls and procedures include, without limitation, internal controls and internal audit procedures designed to ensure
that all necessary information required to be disclosed by the Company in the reports that we file or submit under the Security
Exchange Act 1934 is properly recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms and that information required to be disclosed by us in the reports that we file or submit under the Exchange Act
is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to
allow timely decisions regarding required disclosure.
As of the end of the period covered by
this Annual Report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer
and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based
upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls
and procedures are effective.
(b) Management’s
Report on Internal Control over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in Exchange
Act Rule 13a-15(f), is a process designed by, or under the supervision of, our principal executive and principal financial officers
and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures that:
|
• |
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of our assets; |
|
• |
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of our management and directors; and |
|
• |
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use of disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation. Our management assessed the effectiveness of our internal control over financial reporting as of
December 31, 2014. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this assessment, management believes that
as of December 31, 2014, our internal control over financial reporting is effective based on those criteria.
ITEM 9B. OTHER INFORMATION
Credit Contract Between SZ Springpower
and Industrial Bank Co., Ltd., Longgang, Shenzhen branch
On October 23, 2014, SZ Springpower entered
into a comprehensive credit line contract with Industrial Bank Co., Ltd., Longgang Shenzhen Sub-branch, which provides for a revolving
line of credit of up to RMB40,000,000 (US$6,530,825). Up to RMB20,000,000 (US$3,265,413) may be used for a working capital, up
to RMB40,000,000 (US$6,530,825) may be used for bank acceptance, up to RMB20,000,000 (US$3,265,413) may be used for export loan
under mortgage of documents and up to RMB40,000,000 (US$6,530,825) may be used for standby letter of credit, although the maximum
amount that the company may have outstanding under the facility at any given time is RMB40 million. SZ Springpower may withdraw
the loan, from time to time as needed, but must make a specific drawdown application on or before October 23, 2015, after which
time the bank may cancel all or part of the facilities. The loan is guaranteed by SZ Highpower and our Chief Executive Officer,
Dang Yu Pan.
The following constitute events of default
under the loan contract: any information provided by or representation or warranty made by SZ Springpower proves to have been
untrue, inaccurate, incomplete or misleading; a deterioration or obvious weakening of SZ Highpower’s credit standing or
ability to repay the loan; a cross default under certain agreements involving SZ Springpower or a guarantor, or their related
parties; SZ Springpower’s violation of any obligations in an affiliated specific credit line contract; SZ Springpower’s
failure to timely repay the principal, interest and fees under the contract and any specific contract; SZ Springpower’s
suspension of payment, or failure or indication that it is unable to repay, the debt due; SZ Springpower’s termination of
its business, liquidation, bankruptcy, dissolution, or revocation or cancellation of it business permit ; SZ Springpower’s
involvement in a major business dispute or deteriorated financial situation; or the emergence of any other situation that endanger,
damage, or may endanger, damage the bank’s rights and benefits. Under the WC Loan Agreement, each of the following also
constitutes events of default: SZ Highpower’s failure to use the loan proceeds for the prescribed purposes without the prior
written consent of the bank; SZ Highpower’s use of false contracts with related parties to obtain bank funds or credit;
SZ Springpower’s refusal to accept the bank’s supervision and inspection of the use of credit funds, and operational
and financial activities; the occurrence of a merger, split, acquisition, reorganization, equity transfer, increase in debt financing
or any other major event involving SZ Highpower that the bank believes might affect the safety of the loans; SZ Springpower’s
purposeful evasion of bank debts through related party transactions; and the devaluation of any pledged or mortgaged property.
Upon the occurrence of an event of default
under the CCL Agreement, the bank may: temporarily suspend or permanently terminate SZ Springpower’s credit limit in whole
or in part; announce the immediate expiration of all or part of the debts under the contract; terminate the contract and declare
all amounts outstanding under the contract immediately due and payable; request overdue interest from SZ Springpower caused by
the default; request penalty interest; or request compensation in full from SZ Springpower for the breach.
Credit Contract Between SZ Highpower
and Ping An Bank Co., Ltd. Shenzhen Branch
Working Capital Loan Contract Between
SZ Highpower and Ping An Bank Co., Ltd. Shenzhen Branch
On October 20, 2014, SZ Highpower entered
into a comprehensive credit line contract with Ping An Bank Co., Ltd. Shenzhen Branch, which provides for a revolving line of
credit of up to RMB70,000,000 (US$11,428,945). SZ Highpower may withdraw the loan, from time to time as needed, on or before October
19, 2015. The loan is guaranteed by SZ Springpower and our Chief Executive Officer, Dang Yu Pan.
On October 20, 2014, SZ Highpower entered
into a loan contract with Ping An Bank Co., Ltd. Shenzhen Branch providing for an aggregate loan of US$1,625,000 to be used by
SZ Highpower to purchase raw materials. The term of the loan is 12 months from the first withdrawal date. The interest rate is
fixed interest rate. The loan is guaranteed by SZ Springpower and our Chief Executive Officer, Dang Yu Pan.
The following constitute events of default
under the loan contracts: SZ Highpower changes the method of payment under the contract; SZ Highpower’s failure to timely
repay the principal, interest and other payable under the contract; SZ Highpower’s failure to use the loan proceeds for
the prescribed purposes; SZ Highpower’s violation of any statement, warranty and commitment with the bank; SZ Highpower’s
violation of any other obligations in the contract; SZ Highpower’s concealment of true important information; SZ Highpower
or a guarantor’s avoidance of bank debts on purpose through related party transactions or otherwise; SZ Highpower or a guarantor’s
transfer of property or use of assets to avoid debts by way of gratis, unreasonably-low priced transactions or for other improper
means; SZ Highpower’s use of false contracts and arrangements sighed with any other third party to get funds or credit from
the bank, including but not limited to pledge or discount of the notes receivable and other claims without actual trading background;
SZ Highpower or a guarantor’s violation of any other contract (including but not limited to credit contract, loan contract
and guarantee contract) with signed with the bank or other banks or issuance of any bonds; The guarantor’s violation of
the guarantee contract (including but not limited to guarantee contract, mortgage contract and pledge contract) or occurrence
of any breach of the guarantee contract, or the guarantee contract is in vain or cancelled; The guaranty value is obvious reduction,
loss, or dispute about the ownership of the guaranty, or the guaranty is sealed up, detained, frozen, deducted, detained or sold
by auction; the occurrence of a merger, split, acquisition, reorganization, equity transfer, increase in debt financing or any
other major event involving SZ Highpower that the bank believes might affect the safety of the loans; SZ Highpower or a guarantor’s
business term has been expired within the credit line period, and SZ Highpower or a guarantor fails to handle the procedures for
renewal.
Upon the occurrence of an event of default,
the bank may: temporarily suspend or permanently terminate SZ Highpower’s credit limit in whole or in part; announce the
immediate expiration of all or part of the debts under the contract and request the payment of part or all the principal, interest
and expenses immediately; request overdue interest from SZ Highpower caused by the default; request SZ Highpower to keep cash
deposit for paying undue acceptance, L/G, L/C or other credit business; request SZ Highpower to provide new guarantee measures
accepted by the bank; deduct the sum in SZ Highpower or a guarantor’s account at the bank to discharge all or part of the
liabilities of the bank without prior consent by the bank; require the guarantors to undertake the guarantee responsibility; take
a legal action to collect the debts, fees and other losses from SZ Highpower by judicial procedure.
Credit Contract Between SZ Highpower
and Bank of Jiangsu, Shenzhen Sub-branch
Credit Contract Between SZ Springpower
and Bank of Jiangsu, Shenzhen Sub-branch
On October 28, 2014, SZ Highpower and
SZ Springpower entered into comprehensive credit line contracts with the Bank of Jiangsu, Shenzhen Sub-branch respectively. SZ
Highpower’s loan agreement provides for a revolving line of credit of up to RMB20,000,000 (US$3,265,413) and SZ Springpower’s
loan agreement provides for a revolving line of credit of up to RMB10,000,000 (US$1,632,706 ). Each borrower may withdraw its
loan, from time to time as needed, but must make a specific drawdown application on or before September 11, 2015, after which
time the bank may cancel all or part of the facilities. SZ Highpower’s loan is guaranteed by our Chief Executive Officer,
Dangyu Pan, his wife Zhoutao Yin and SZ Springpower. SZ Springpower’s loan is guaranteed by Dangyu Pan, his wife Zhoutao
Yin and ICON.
The following constitute events of default
under the loan contracts: an adverse change in the borrower’s business market or a significant monetary policy change in
the PRC; the occurrence of significant business difficulties or adverse changes on the financial conditions of the borrower; a
termination of business, liquidation, restructuring, dissolution or bankruptcy by or of the borrower; the borrower’s involvement
in significant litigation, arbitration or administrative penalties, or its involvement in any other significant default with other
creditors; the borrower indicates directly or by its conduct that it will not perform its obligations under the contract or other
contracts with the bank; the borrower’s providing of false materials or withholding of important financial or operational
facts; the borrower’s failure to perform its obligations under the contract or the affiliated specific credit line contract
executed in connection with specific draw downs; the borrower’s violation of other contracts with the bank; the borrower’s
transfer of assets, retrieval of capital, denial of indebtedness or other actions that may adversely affect the bank’s rights;
the borrower’s involvement in illegal operations; the borrower’s change in corporate structure, such as a separation,
merger, amalgamation, acquisition, reorganization; the borrower’s loss of commercial integrity; a change in the borrower’s
controlling shareholder, or the occurrence of a major event to the borrower’s controlling shareholders, actual controllers,
legal representative, or senior management staff, including, but not limited to, involvement in or the occurrence of illegal operations,
litigation, arbitration, a deteriorated financial situation, bankruptcy or dissolution; the guarantor’s breach of the contract,
or guarantee agreement or the occurrence of other situations that may negatively affect the guarantor’s ability to guaranty
the loan; or any other circumstance affect or may affect the bank’s ability to collect on the loan.
Upon the occurrence of an event of default,
the bank may: adjust the maximum amount of the line of credit and/or cancel the comprehensive contract, terminate the unused portion
of the credit line.
Credit Contract Between SZ Springpower
and Shenzhen Bao An Gui Yin County Bank Co., Ltd., Longhua, branch
On November 11, 2014, SZ Springpower entered
into a comprehensive credit line contract with Shen Zhen Bao An Gui Yin County Bank Co., Ltd., Longhua, branch, which provides
for a revolving line of credit of up to RMB29,000,000 (US$4,734,848) for bank acceptance. SZ Springpower may withdraw the loan,
from time to time as needed on or before November 18, 2015, after which time the bank may cancel all or part of the facilities.
The loan is guaranteed by SZ Highpower and our Chief Executive Officer, Dang Yu Pan.
The following constitute events of default
under the credit contracts: SZ Springpower has any breach under this contract and legal; SZ Springpower expressly indicates or
indicates by its act not perform any obligation under the contract; any other debts have affected or may affect SZ Springpower
to perform obligations under the contract. SZ Springpower failed to provide a new guarantee, when the guarantee ability of guarantor
changed.
Upon the occurrence of an event of default,
the bank may: advisably adjust, cancel or terminate SZ Springpower’s credit limit or credit valid period in whole or in
part; announce the immediate expiration of all or part of the debts under the contract; terminate the contract and declare all
amounts outstanding under the contract immediately due and payable; request 0.5‰ of the principal balance of the credit
product under the contract as liquidated damages from SZ Springpower; request penalty interest, if SZ Springpower fail to use
the credit for the purpose specified ; request deducting the funds payable from any SZ Springpower account in the branch; request
exercising the right of guarantee; request SZ Springpower to re-provide the guarantee or cancel the contract.
Working Capital Loan Contract Between
SZ Highpower and Industrial and Commercial Bank of China Ltd, Shenzhen Henggang Branch
On November 21, 2014, SZ Highpower entered
into a working capital loan contract with Industrial and Commercial Bank of China Ltd, Shenzhen Henggang Branch providing for
an aggregate loan of RMB16,000,000 (US$2,612,330) to be used by SZ Highpower for production and management. The use of the loan
proceeds may not be changed without the prior written consent of the bank. SZ Highpower may withdraw the loan from time to time
as needed before May 18, 2015. The term of the loan is 12 months from the first withdrawal date. The interest rate is floating
and will equal the one year benchmark lending rate promulgated by the People’s Bank of China, plus 15%. The loan is guaranteed
by SZ Springpower, HKHTC and our Chief Executive Officer, Dangyu Pan.
The following constitute events of default
under the loan contract: SZ Highpower’s failure to timely repay the principal, interest and other payables under the contract;
SZ Highpower’s failure to perform any obligations under the contract; the inaccuracy of any representations and warranties
of SZ Highpower contained in the contract; any changes in guarantees provided in the loan that adversely affect the bank’s
ability to collect from the guarantors and SZ Highpower is unable to provide alternate guarantors acceptable to the bank; SZ Highpower’s
failure to pay off any of its other due debts or comply with its other obligations in the contract which may affect SZ Highpower’s
performance of its obligations under the contract; a deterioration in the financial performance, profitability, debt repayment
ability, operating capacity or cash flow of SZ Highpower, that may affect its ability to comply with the obligations under the
contract; a change in SZ Highpower’s ownership structure or operations that are likely to affect its ability to comply with
its obligations under the contract; SZ Highpower’s involvement or potential involvement in significant economic disputes,
litigation, arbitration or asset seizure or confiscation, or its involvement in other judicial proceedings or administrative punishment
proceedings that affect or may affect its capacity to perform its obligations under the affiliated specific credit line contract;
an change in any major individual investor or key management member of SZ Highpower or such a person or entity’s becoming
subject to investigation or restriction by the judiciary, which have or may affect SZ Highpower’s performance of its obligations;
SZ Highpower’s use of false contracts with related parties to obtain bank funds or credit or to evade bank debt; SZ Highpower’s
bankruptcy, dissolution, liquidation, reorganization or cessation of business operations, or revocation, cancellation or voiding
of its business permit; SZ Highpower’s breach of food safety, production safety, environmental protection and other environmental
and social risk management related laws and regulations, regulatory requirements or industry standards, that are likely to affect
its ability to comply with its obligations under the contract; SZ Highpower’s credit rating, profitability, asset-liability
ratio, net cash flow of operations or other indicators do not meet the credit conditions of the bank; SZ Highpower, without the
bank’s written contract, pledges, guarantees or provides assurance guarantees to other parties, which is likely to affect
its ability to comply with its obligations under the contract; or any other adverse situation which may affect the bank’s
ability to collect on the loan.
Upon the occurrence of an event of default,
the bank may: request SZ Highpower rectify the event of default within a specified time period; cancel or terminate SZ Highpower’s
the unused portion of the credit line and other financing arrangements in whole or in part; declare all amounts outstanding under
the contract immediately due and payable; require SZ Highpower to compensate the bank for losses it incurs as a result of the
event of default; or other measures permitted under applicable law or other necessary measures.
PART III
ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS, AND CORPORATE GOVERNANCE
The following individuals constitute our
board of directors and executive management:
Name |
|
Age |
|
Position |
Dang Yu Pan |
|
48 |
|
Chairman of the Board and Chief Executive Officer |
Wen Liang Li |
|
50 |
|
Vice President, Chief Technology Officer and Director |
Wen Wei Ma |
|
46 |
|
Vice President of Manufacturing |
Henry Sun |
|
43 |
|
Chief Financial Officer and Corporate Secretary |
Wen Jia Xiao |
|
39 |
|
Vice President of Quality Control |
Xin Hai Li |
|
53 |
|
Director |
T. Joseph Fisher, III |
|
64 |
|
Director |
Ping Li |
|
51 |
|
Director |
Dang Yu Pan has been the
Chairman of the Board and Chief Executive officer of Highpower International and HKHTC since November 2007 and July 2003, respectively.
Mr. Pan is the founder of SZ Highpower and has served as the Chairman of the Board and Chief Executive Officer of SZ Highpower
since October 2002. Mr. Pan has served as a director ICON since February 2011; as a director and Chief Executive Officer of SZ
Springpower since June 2008; and as a director of HZ HTC since March 2012. From May 2001 to October 2002, Mr. Pan was the General
Manager and Chairman of the Board of Guangzhou Haopeng Technology Co., Ltd. From January 1997 to July 2000, Mr. Pan was the Vice
General Manager of NanhaiShida Battery Co., Ltd. From January 1995 to December 1996, Mr. Pan served as a director of the Huangpu
Aluminum Factory. Additionally, from August 1990 to December 1994, Mr. Pan worked in the sales department of the Guangzhou Aluminum
Products Factory. Mr. Pan received a bachelor’s degree in metallurgical engineering from Central South University in China
in 1990. We believe Mr. Pan’s qualifications to sit on our Board include his extensive understanding of our business,
our products and the battery industry that he has acquired over his 16 years working in the battery industry, including over 10
years as an officer and director of SZ Highpower.
Wen Liang Li has been a
director of Highpower International since November 2007 and a director of HKHTC since July 2003. Since January 2003, Mr. Li. has
served as a director and as Vice General Manager and Chief Technology Officer of SZ Highpower. Mr. Li has served as a director
of SZ Springpower since June 2008, as a director of HZ HTC since March 2012 and as a director of Shenzhen Highpower’s 70%-owned
subsidiary, Ganzhou Highpower Technology Co., Ltd (“GZ Highpower”), since September 2010. From January 1996 to December
2002, Mr. Li served as Vice General Manager of Zhuhai Taiyi Battery Co., Ltd., a battery manufacturer. Mr. Li received a master’s
degree in Electrochemistry from the Harbin Institute of Technology in China in 1991. We believe that Mr. Li’s 22 years of
work experience in the battery industry, including 10 years as an officer and director of SZ Highpower, well qualify Mr. Li to
serve on our Board.
Wen Wei Ma has served as
the Company’s Vice President of Manufacturing since November 2007 and as a director of HKHTC since July 2003. Mr. Ma has
served as a director and as a Vice General Manager of Manufacturing of SZ Highpower since October 2002. Mr. Ma received a diploma
in chemistry analysis from the Guangzhou Trade School of Light Industry in China in 1989.
Henry Sun has served as
the Chief Financial Officer of the Company since January 2011. Mr. Sun joined the Company in November 2010 as the President’s
Assistant. Prior to joining the Company, Mr. Sun was the Chief Financial Officer of Zoom lion Concrete Machinery Company
from November 2009 to October 2010. From November 2008 to September 2009, Mr. Sun served as the Finance Director of Yasheng
Group USA (OTCBB: YHGG). From December 2006 to November 2008, he was the senior finance manager of Cepheid, Inc. (NASDAQ: CPHD). From
October 2003 to September 2006, he was a financial consultant at Merrill Lynch. Mr. Sun received a BSEE degree from Beijing
University of Post and Telecommunications, and a master degree from the Thunderbird School of Global Management.
Wen Jia Xiao has served
as Vice President of Quality Control of the Company since November 2007 and as Vice General Manager of Quality Control of SZ Highpower
since October 2005. Mr. Xiao has served as a director of SZ Highpower since November 2007. From October 2002 to September 2005,
Mr. Xiao served as the Minister of the Quality Control Department of SZ Highpower. Mr. Xiao received a bachelor’s degree
in Check Technology and Instrument in 2000 from the China Institute of Metrology.
Xin Hai Li has served as
a director of the Company since January 2008. Since August 1990, Mr. Li has served as a director and professor at the China Central
South University Metallurgical Science and Engineering School in China. Mr. Li received a PhD in Physical Chemistry of Metallurgy
from China Central South University in August 1990. We believe that Mr. Li’s qualifications to sit on our Board include
his extensive understanding of our business and his understanding of U.S. GAAP and financial statements.
T. Joseph Fisher III has served
as a director of the Company since April 2011. He currently is Vice President - Global Commercial Sales for A123 Systems, LLC since
July 2014. He previously served as the CEO and President of Valence Technology, Inc. from November 2012 until June 2014, which
exited a chapter 11 bankruptcy in November 2013. Prior to joining Valence, Mr. Fisher was the CEO and President of Contour Energy
Systems, a spin out from Caltech, specializing in the development and commercialization of customizable battery technologies, from
February 2008 to January 2012. He also is President and Founder of JCF International, LLC, an advisory and consulting firm for
portable power companies. Mr. Fisher was employed for 32 years at the Energizer battery group, where he had held numerous senior
management positions including Vice President - Global Rechargeable Battery Business Unit from April 2001 to May 2007, Vice President
and General Manager - Energizer Power Systems, Vice President - Business Development, General Manager - Miniature Batteries, as
well as holding several international management assignments in Europe, Argentina and South Africa. He also worked for Xerox, General
Electric and Union Carbide earlier in his career. Mr. Fisher received a B.S. in Industrial Management from the University of Cincinnati,
and an MBA from the West Virginia College of Graduate Studies, now a part of Marshall University. We believe that Mr. Fisher’s
qualifications to sit on our Board include his extensive understanding of our business and over 30 years of experience in the battery
industry, as well as his knowledge of U.S. GAAP and financial statements.
Ping Li has served as a
director of the Company since January 2008. Since November 2008, Mr. Li has served as Director at Intel Capital, focusing on Intel’s
investment activities in China. From July 2003 to October 2008, Mr. Li served as the Managing Director of Investment at China
Vest, a venture capital firm. From February 2002 to July 2003, Mr. Li served as Chief Financial Officer of Great Wall Technology
Co., Ltd., an investment technology company. Mr. Li received a master’s degree in biology from Columbia University in 1989
and an MBA in finance in 1994 from the Wharton School of the University of Pennsylvania. We believe that Mr. Li’s qualifications
to sit on our Board include his knowledge of the capital markets and his experience, expertise and background with respect to
accounting matters, including his experience as a chief financial officer and familiarity with U.S. GAAP and financial statements.
Family Relationships
There are no family relationships among
any of the officers and directors.
Director Independence
Subject to certain exceptions, under the
listing standards of the NASDAQ Stock Market, LLC, a listed company’s board of directors must consist of a majority of independent
directors. Currently, our board of directors has determined that each of the non-management directors, Xin Hai Li, T. Joseph Fisher,
III and Ping Li, is an “independent” director as defined by the listing standards of the NASDAQ Marketplace Rules
currently in effect and approved by the U.S. Securities and Exchange Commission (“SEC”) and all applicable rules and
regulations of the SEC. All members of the Audit, Compensation and Nominating Committees satisfy the “independence”
standards applicable to members of each such committee. The board of directors made this affirmative determination regarding these
directors’ independence based on discussion with the directors and on its review of the directors’ responses to a
standard questionnaire regarding employment and compensation history; affiliations, family and other relationships; and transactions
with the Company. The board of directors considered relationships and transactions between each director or any member of his
immediate family and the Company and its subsidiaries and affiliates. The purpose of the board of director’s review with
respect to each director was to determine whether any such relationships or transactions were inconsistent with a determination
that the director is independent under the NASDAQ Marketplace Rules.
Board Committees
Audit Committee
We established our Audit Committee in
January 2008. The Audit Committee consists of Xin Hai Li, T. Joseph Fisher, III and Ping Li, each of whom is an independent director.
Mr. Ping Li, Chairman of the Audit Committee, is an “audit committee financial expert” as defined under Item 407(d)
of Regulation S-K. The purpose of the Audit Committee is to represent and assist our board of directors in its general oversight
of our accounting and financial reporting processes, audits of the financial statements and internal control and audit functions.
The Audit Committee’s responsibilities include:
|
· |
The appointment, replacement, compensation, and oversight of work of the independent auditor, including
resolution of disagreements between management and the independent auditor regarding financial reporting, for the purpose
of preparing or issuing an audit report or performing other audit, review or attest services. |
|
· |
Reviewing and discussing with management and the independent auditor various topics and events that
may have significant financial impact on our company or that are the subject of discussions between management and the independent
auditors. |
The board of directors has adopted a written charter for the
Audit Committee. A copy of the Audit Committee Charter is posted on the Company’s website at: www.highpowertech.com.
Compensation Committee
We established our Compensation Committee
in January 2008. The Compensation Committee consists of Xin Hai Li and T. Joseph Fisher, III, each of whom is an independent director.
Xin Hai Li is the Chairman of the Compensation Committee. The Compensation Committee is responsible for the design, review, recommendation
and approval of compensation arrangements for the Company’s directors, executive officers and key employees, and for the
administration of our equity incentive plans, including the approval of grants under such plans to our employees, consultants
and directors. The Compensation Committee also reviews and determines compensation of our executive officers, including our Chief
Executive Officer. The board of directors has adopted a written charter for the Compensation Committee. A current copy of the
Compensation Committee Charter is posted on the Company’s website at: www.highpowertech.com.
Nominating Committee
The Nominating Committee consists of Xin
Hai Li and T. Joseph Fisher, III, each of whom is an independent director. T. Joseph Fisher, III is the Chairman of the Nominating
Committee. The Nominating Committee assists in the selection of director nominees, approves director nominations to be presented
for stockholder approval at our annual general meeting and fills any vacancies on our board of directors, considers any nominations
of director candidates validly made by stockholders, and reviews and considers developments in corporate governance practices.
The board of directors has adopted a written charter for the Nominating Committee. A current copy of the Nominating Committee
Charter is posted on the Company’s website at: www.highpowertech.com.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company’s securities are currently
registered under Section 12 of the Securities Exchange Act of 1934, as amended. As a result, and pursuant to Rule 16a-2, the Company’s
directors and officers and holders of 10% or more of its common stock are currently required to file statements of beneficial
ownership with regards to their ownership of equity securities under Sections 13 or 16 of the Exchange Act. Based on a review
of written representations from our executive officers and directors and a review of Forms 3, 4 and 5 furnished to us, we believe
that during the fiscal year ended December 31, 2014, no directors, officers or owners of more than 10% failed to file, on a timely
basis, reports required by Section 16(a) of the Exchange Act.
Code of Ethics
The Company’s board of directors
has adopted a Code of Business Conduct and Ethics, which applies to all directors, officers and employees. The purpose of the
Code is to promote honest and ethical conduct. The Code is posted on the Company’s website located at: www.highpowertech.com,
and is available in print, without charge, upon written request to the Company at Highpower International, Inc., Building A1,
68 Xinxia Street, Pinghu, Longgang, Shenzhen, Guangdong, 518111, People’s Republic of China. The Company intends to post
promptly any amendments to or waivers of the Code on its website.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information
concerning the compensation for the fiscal years ended December 31, 2014 and 2013 of the principal executive officer and up to
two other officers whose compensation exceeded $100,000 during such years (our “named executive officers”).
Name and Position | |
Year | | |
Salary | | |
Bonus | | |
Stock
Awards (1) | | |
Option
Awards (1) | | |
Total | |
Dang Yu Pan | |
| 2014 | | |
$ | 67,000 | | |
$ | - | | |
$ | 129,271 | | |
| - | | |
$ | 196,271 | |
CEO and Chairman | |
| 2013 | | |
$ | 67,000 | | |
$ | 50,000 | | |
$ | 75,954 | | |
| - | | |
$ | 192,954 | |
Henry Sun | |
| 2014 | | |
$ | 87,000 | | |
$ | - | | |
$ | - | | |
| 171,796 | | |
$ | 258,796 | |
Chief Financial Officer | |
| 2013 | | |
$ | 87,000 | | |
$ | 23,500 | | |
$ | - | | |
| 107,611 | | |
$ | 218,111 | |
Wen Liang Li | |
| 2014 | | |
$ | 77,000 | | |
$ | - | | |
$ | 97,563 | | |
| - | | |
$ | 174,563 | |
Vice President, Chief | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Technology Officer and Director | |
| 2013 | | |
$ | 77,000 | | |
$ | 26,000 | | |
$ | 57,324 | | |
| - | | |
$ | 160,324 | |
| (1) | Represents the full grant date fair value computed in
accordance with FASB ASC Topic 718.For assumptions used in calculation of awards, see Note 17 (Share Based Payment) to our consolidated
financial statements included in this Annual Report on Form 10-K. |
We do not have any employment
agreements with any of our named executive officers. Bonus is based on performance. Key performance indicators used as
criteria for determining bonuses include corporate profitability, sales growth, and corporate milestone achievements. On
January 21, 2011, the Company granted Mr. Sun ten-year options to purchase an aggregate of 250,000 shares of common stock at
an exercise price of $3.55 per share. With respect to the grant, options to purchase 250,000 shares have been fully vested.
On November 14, 2013, the Company granted Mr. Sun ten-year option to purchase an aggregate of 40,000 shares of common stock
at an exercise price of $2.63 per share, With respect to the grant, options to purchase 12,000 shares have been vested, and
12,000 will vest on November 14, 2015 and 16,000 on November 14, 2016. On October 8, 2013, the Company granted 246,000
shares of restricted stock to members of the Board of Directors as Restricted Stock Awards (“RSA”) under the 2008
Omnibus Incentive Plan. Mr. Pan and Mr. Li received 106,000 and 80,000 RSAs, respectively. The RSAs granted in 2013 had the
following vesting periods, 30% immediately upon grant, 30% on first anniversary of grant date, and 40% on second anniversary
of grant date.
Outstanding Equity Awards at 2014 Fiscal Year End
The following table sets forth the outstanding stock options
for each of our named executive officers as of December 31, 2014.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| |
Option Awards | |
Stock Awards | |
Name | |
Number of Securities Underlying Unexercised
options(#) exercisable | | |
Number of Securities Underlying Unexercised
options(#) unexercisable | | |
Option Exercise Price($) | | |
Option Expiration Date | |
Number of Shares that have Not Vested (#) | | |
Market Value of Shares that have not
vested ($)(1) | |
Henry Sun | |
| 250,000 | | |
| - | | |
| 3.55 | | |
11/1/2021 | |
| - | | |
| - | |
| |
| 12,000 | | |
| 28,000 | (2) | |
| 2.63 | | |
11/14/2023 | |
| - | | |
| - | |
Dang Yu Pan | |
| - | | |
| - | | |
| - | | |
- | |
| 42,400 | (3) | |
| 210,728 | |
Wen Liang Li | |
| - | | |
| - | | |
| - | | |
- | |
| 32,000 | (3) | |
| 159,040 | |
(1) Market value is based on the closing
price of $4.97 of the Company’s common stock on December 31, 2014.
(2) Options vest as follows: 12,000 options
on November 14, 2015 and 16,000 options on November 14, 2016.
(3) On October 15, 2013, Mr. Pan was granted
106,000 RSAs and Mr. Li was granted 80,000 RSAs under the 2008 Omnibus Incentive Plan. The shares vest on each anniversary of
the date of grant with 30% of the shares vested on the date of grant, 30% vesting in 2014 and 40% vesting in 2015.
Director Compensation
The following table shows information regarding the compensation
earned during the fiscal year ended December 31, 2014 by members of board of directors. Compensation information for Dang
Yu Pan and Wen Liang Li is described in the summary compensation table above.
Name | |
Fees Earned or Paid in Cash ($) | | |
Stock Awards ($)(1) | | |
Option Awards ($)(1) | | |
Total ($) | |
T. Joseph Fisher, III | |
| 24,000 | | |
| 36,586 | | |
| 1,971 | | |
| 62,557 | |
Xin Hai Li | |
| 12,000 | | |
| 18,293 | | |
| - | | |
| 30,293 | |
Ping Li | |
| 12,000 | | |
| 18,293 | | |
| - | | |
| 30,293 | |
| (1) | Represents the full grant date fair
value computed in accordance with FASB ASC Topic 718. For assumptions used in calculation
of equity awards, see Note 17 (Share Based Payment) to our consolidated financial statements
included in this Annual Report on Form 10-K. |
Dang Yu Pan and Wen Liang Li are management
board members. While in previous years, we offered our management board members a total compensation package, which include salary,
bonus and director fees, we now do not pay such directors separate fees for board membership. We now offer our management board
members a compensation package consisting of salary and bonus based on benchmarks reported by Shenzhen Labor Bureau.
We do not have a formal policy with respect
to the compensation of our non-executive directors. We pay our non-executive directors for their services at the rate of
$1,000 to $3,000 per month.
Directors are eligible to receive, from time to time, grants
of options to purchase shares of our common stock and other awards under our 2008 Omnibus Incentive Plan (the “Plan”).
Securities Authorized for Issuance under Equity Compensation
Plans
The following table provides information
as of December 31, 2014 regarding compensation plans, including any individual compensation arrangements, under which equity
securities of Highpower International, Inc. are authorized for issuance.
Plan Category | |
Number of Securities to be issued upon exercise of outstanding options, warrants and rights | | |
Weighted- average exercise price of outstanding options, warrants and rights | | |
Number of securities remaining available for future issuance under equity compensation plans | |
Equity compensation plans approved by security holders | |
| 760,286 | | |
$ | 2.92 | | |
| 626,714 | |
Equity compensation plans not approved by security holders | |
| - | | |
| - | | |
| - | |
Total | |
| 760,286 | | |
| NA | | |
| 626,714 | |
As of March 30, 2015, there were 626,714
shares available for issuance pursuant to the Plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Beneficial ownership is determined in
accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage of ownership
of that person, shares of common stock subject to options and warrants held by that person that are currently exercisable or become
exercisable within 60 days of March 30, 2015 are deemed outstanding even if they have not actually been exercised. Those shares,
however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
The following table sets forth as of March
30, 2015 certain information with respect to beneficial ownership of our common stock based on 15,084,746 issued and outstanding
shares of common stock, by:
|
· |
Each person known to be the beneficial owner of 5% or more of the outstanding
common stock of our company; |
|
· |
Each named executive officer; |
|
|
· |
Each director; and |
|
|
· |
All of the executive officers and directors as a group. |
|
The number of shares of our common stock
outstanding as of March 30, 2015 excludes 1,500,287 shares of our common stock issuable upon the exercise of outstanding options
and warrants. Unless otherwise indicated, the persons and entities named in the table have sole voting and sole investment
power with respect to the shares set forth opposite the stockholder’s name, subject to community property laws, where applicable.
Unless otherwise indicated, the address of each stockholder listed in the table is c/o Building A1, 68 Xinxia Street, Pinghu,
Longgang, Shenzhen, Guangdong, 518111, People’s Republic of China.
Name and Address of Beneficial Owner | |
Title | |
Amount and Nature of Beneficial Ownership | | |
Percent of Class | |
| |
| |
| | | |
| | |
Directors and Executive Officers | |
| |
| | | |
| | |
Dang Yu Pan | |
Chief Executive Officer and Chairman of the Board | |
| 3,062,773 | (1) | |
| 20.2 | % |
| |
| |
| | | |
| | |
Wen Liang Li | |
Vice President, Chief Technology Officer and Director | |
| 2,133,970 | | |
| 14.1 | % |
| |
| |
| | | |
| | |
Wen Wei Ma | |
Vice President of Manufacturing | |
| 924,897 | | |
| 6.1 | % |
| |
| |
| | | |
| | |
Henry Sun | |
Chief Financial Officer and Corporate Secretary | |
| 267,800 | (2) | |
| 1.7 | % |
| |
| |
| | | |
| | |
Xin Hai Li | |
Director | |
| 15,000 | | |
| | * |
| |
| |
| | | |
| | |
T. Joseph Fisher III | |
Director | |
| 21,000 | (3) | |
| | * |
| |
| |
| | | |
| | |
Ping Li | |
Director | |
| 15,000 | | |
| | * |
| |
| |
| | | |
| | |
Officers and Directors as a Group (total of 7 persons)
| |
| |
| 6,476,440 | (4) | |
| 41.5 | % |
* Indicates beneficial ownership of less
than 1.0%.
(1) Includes 269,959 shares held by a
company that is 100% owned by Mr. Pan.
(2) Includes 262,000shares underlying
options.
(3) Includes 15,000 shares underlying
options.
(4) Includes shares underlying options
to purchase 277,000 shares of the Company’s common stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Hong Kong Highpower Technology Co., Ltd.
Hong Kong Highpower Technology Co., Ltd.
(“HKHTC”), a wholly-owned subsidiary of Highpower International, Inc., and each of HKHTC’s wholly-owned subsidiaries,
Shenzhen Highpower Technology Co., Ltd., Huizhou Highpower Technology Co., Ltd., Springpower Technology (Shenzhen) Company Limited
and ICON have interlocking executive and director positions with the Company.
Guarantee Agreements
Mr. Dang Yu Pan, our Chairman and Chief
Executive Officer, and his wife, Ms. Zhou Tao Yin, and Mr. Wen Liang Li, our Vice President have provided personal guarantees
under certain of our outstanding banking facilities. The following table shows the amount outstanding on each of our bank loans
as of December 31, 2014 and the guarantors of each loan.
Name of Bank | |
Amount Granted | | |
Unused line of
credit | | |
Guaranteed by |
Bank of China | |
$ | 12,653,474 | | |
$ | 424,823 | | |
Dang Yu Pan |
Bank of China | |
$ | 3,965,144 | | |
$ | 67,516 | | |
Dang Yu Pan, Wen Liang Li |
Ping An Bank Co., Ltd | |
$ | 11,428,945 | | |
$ | 295,818 | | |
Dang Yu Pan |
China Minsheng Banking Corp., LTD | |
$ | 3,265,413 | | |
$ | - | | |
Dang Yu Pan |
Industrial and Commercial Bank of China | |
$ | 6,530,826 | | |
$ | 3,918,496 | | |
Dang Yu Pan |
China Citic Bank | |
$ | 8,046,910 | | |
$ | 6,788,093 | | |
Dang Yu Pan |
Industrial Bank Co., Ltd | |
$ | 6,530,825 | | |
$ | 4,430,636 | | |
Dang Yu Pan |
Jiang Su Bank Co., Ltd | |
$ | 4,898,119 | | |
$ | 4,898,119 | | |
Dang Yu Pan, Zhou Tao Yin |
Shenzhen Baoan Guiyin County Bank | |
$ | 4,734,848 | | |
$ | 1,750,151 | | |
Dang Yu Pan |
Total: | |
$ | 62,054,504 | | |
$ | 22,573,652 | | |
|
Policy for Approval of Related Party Transactions
Our Audit Committee Charter to provides that the Audit Committee
is responsible for reviewing and approving related party transactions with both officers and directors, including any payments
made to such persons either directly or indirectly. Other than the forgoing, we do not currently have a formal related party approval
policy for review and approval of transactions required to be disclosed pursuant to Item 404 (a) of Regulation S-K.
Director Independence
See Item 10 “Directors, Officers and Corporation Governance”
for a discussion of board member independence.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table presents professional
audit service fees and all the audit-related expenses rendered by Marcum Bernstein & Pinchuk LLP, who reviewed the Company’s
quarterly financial statements and audited the annual financial statements for the years ended December 31, 2014 and December
31, 2013.
| |
Year ended December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Audit Fees(1) | |
$ | 219,641 | | |
$ | 218,136 | |
Audit-Related Fees | |
| - | | |
| - | |
Tax Fees | |
| - | | |
| - | |
All Other Fees | |
| - | | |
| - | |
Total | |
$ | 219,641 | | |
$ | 218,136 | |
(1) These were fees for professional services performed by
Marcum Bernstein &Pinchuk LLP for the review of quarterly financial reports and audit of annual financial statements in 2014
and 2013.
Pre-Approval Policy
The Audit Committee on an annual basis
reviews audit and non-audit services performed by the independent registered public accounting firm for such services. The audit
committee pre-approves (i) audit services (including those performed for purposes of providing comfort letters and statutory audits)
and (ii) non-audit services that exceed a de minim is standard established by the committee, which are rendered to the Company
by its outside auditors (including fees).
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
1. |
Financial Statements: See “Index to Consolidated Financial Statements”
in Part II, Item 7 of this annual report on Form 10-K. |
2. |
Financial Statement Schedule: Not applicable. |
3. |
Exhibits: The exhibits listed in the accompanying “Index to Exhibits” are filed or incorporated
by reference as part of this Form 10-K. |
SIGNATURES
Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Shenzhen, People’s Republic of China, on March 30, 2015.
|
Highpower International, Inc. |
|
(Registrant) |
|
|
Dated: March 30, 2015 |
/s/ Dang Yu Pan |
|
|
By: Dang Yu Pan |
|
Chief Executive Officer and |
|
Chairman of the Board |
|
(Principal Executive Officer) |
Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company in
the capacities and on the dates indicated.
Signature |
|
Capacity |
|
Date |
|
|
|
|
|
|
|
Chief Executive Officer and |
|
March 30, 2015 |
/s/ Dang Yu Pan |
|
Chairman of the Board |
|
|
By: Dang Yu Pan |
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
/s/ Henry Sun |
|
Chief Financial Officer |
|
March 30, 2015 |
By: Henry Sun |
|
(Principal Financial and Accounting Officer) |
|
|
|
|
|
|
|
/s/ Wen Liang Li |
|
Vice President, Chief Technology Officer and |
|
March 30, 2015 |
By: Wen Liang Li |
|
Director |
|
|
|
|
|
|
|
/s/ Xin Hai Li |
|
Director |
|
March 30, 2015 |
By: Xin Hai Li |
|
|
|
|
|
|
|
|
|
/s/ T. Joseph Fisher III |
|
Director |
|
March 30, 2015 |
By: T. Joseph Fisher III |
|
|
|
|
|
|
|
|
|
/s/ Ping Li |
|
Director |
|
March 30, 2015 |
By: Ping Li |
|
|
|
|
EXHIBIT INDEX
Exhibit
Number |
|
Description |
3.1 |
|
Certificate of Incorporation (incorporated by reference from Exhibit 3.1 to the Registration Statement on Form 10-SB (File No. 000-52103) filed with the Securities and Exchange Commission on July 5, 2006). |
|
|
|
3.2 |
|
Bylaws (incorporated by reference from Exhibit 3.2 to the Registration Statement on Form 10-SB (File No. 000-52103) filed with the Securities and Exchange Commission on July 5, 2006). |
|
|
|
3.3 |
|
Articles of Merger Effecting Name Change (incorporated by reference from Exhibit 3.3 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 5, 2007). |
|
|
|
3.4 |
|
Certificate of Amendment to Certificate of Incorporation (incorporated by reference from Exhibit 3.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 20, 2010). |
|
|
|
4.1 |
|
Form of Warrant (incorporated by reference exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2014). |
|
|
|
4.2 |
|
Warrants to Purchase Shares of Common Stock dated January 17, 2014 issued by Patrick Ko (incorporated by reference (incorporated by reference from Exhibit 4.1 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2014). |
|
|
|
4.3 |
|
Form of Warrant issued on April 17, 2014 to Ardour Capital Investments, LLC and it assignees (incorporated by reference (incorporated by reference from Exhibit 4.1 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2014). |
|
|
|
10.1 |
|
State-owned Land Use Rights Grant Contract No. 441302 – B – 112 dated as of May 23, 2007, by and between the Land and Resources Bureau of Huizhou City, Guangdong Province and Shenzhen Highpower Technology Co., Ltd. (translated to English) (incorporated by reference from Exhibit 10.4 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 5, 2007). |
|
|
|
10.2 |
|
Comprehensive Credit Line Contract dated October 23, 2014 by and between Industrial Bank Co., Ltd., Longgang, Shenzhen Branch and Springpower Technology (Shenzhen) Company Limited and corresponding guarantee contracts (translated to English). |
|
|
|
10.2(a) |
|
Maximum Guarantee Contract between Industrial Bank Co., Ltd., Longgang, Shenzhen Branch and
Pan Dangyu (translated to English). |
|
|
|
10.2(b) |
|
Maximum Guarantee Contract between Industrial Bank Co., Ltd., Longgang, Shenzhen Branch and
Shenzhen Highpower Technology Company Limited (translated to English). |
|
|
|
10.3 |
|
Comprehensive Credit Line Contract dated October 20, 2014 by and between Ping An Bank Co., Ltd. Shenzhen Branch and Shenzhen Highpower Technology Company Limited and corresponding guarantee contracts (translated to English). |
|
|
|
10.3(a) |
|
Working Capital Loan Contract dated October 20, 2014 by and between Ping An Bank Co., Ltd. Shenzhen Branch and Shenzhen Highpower Technology Company Limited (translated to English). |
10.3(b) |
|
Maximum Guarantee Contract between Ping An Bank Co., Ltd. Shenzhen Branch and Pan
Dangyu (translated to English). |
|
|
|
10.3(c) |
|
Maximum Guarantee Contract between Ping An Bank Co., Ltd. Shenzhen Branch and Springpower
Technology (Shenzhen) Company Limited (translated to English). |
|
|
|
10.4 |
|
Comprehensive Credit Line Contract dated October 28, 2014 by and between Bank of Jiangsu, Shenzhen Sub-branch and Shenzhen Highpower Technology Company Limited and corresponding guarantee contracts (translated to English). |
|
|
|
10.4(a) |
|
Maximum Guarantee Contract between Bank of Jiangsu, Shenzhen Sub-branch and Pan Dangyu (translated to English). |
|
|
|
10.4(b) |
|
Maximum Guarantee Contract between Bank of Jiangsu, Shenzhen Sub-branch and Springpower Technology (Shenzhen) Company Limited. |
|
|
|
10.5 |
|
Comprehensive Credit Line Contract dated October 28, 2014 by and between Bank of Jiangsu, Shenzhen Sub-branch and Springpower Technology (Shenzhen) Company Limited and corresponding guarantee contracts (translated to English). |
|
|
|
10.5(a) |
|
Maximum Guarantee Contract between Bank of Jiangsu, Shenzhen Sub-branch and Pan Dangyu (translated to English). |
|
|
|
10.5(b) |
|
Maximum Guarantee Contract between Bank of Jiangsu, Shenzhen Sub-branch and Icon Energy System Company Limited. |
|
|
|
10.6 |
|
Comprehensive Credit Line Contract dated November 11, 2014 by and between Shen Zhen Bao An Gui Yin County Bank Co., Ltd., Longhua, Branch and Springpower Technology (Shenzhen) Company Limited and corresponding guarantee contracts (translated to English) |
|
|
|
10.6(a) |
|
Maximum Guarantee Contract between Shen Zhen Bao An Gui Yin County Bank Co., Ltd., Longhua,
Branch and Pan Dangyu (translated to English). |
|
|
|
10.6(b) |
|
Maximum Guarantee Contract between Shen Zhen Bao An Gui Yin County Bank Co., Ltd., Longhua,
Branch and Shenzhen Highpower Technology Company Limited (translated to English). |
|
|
|
10.7 |
|
Working Capital Loan Contract dated November 21, 2014 by and between Industrial and Commercial Bank of China Ltd, Shenzhen Henggang Branch and Shenzhen Highpower Technology Company Limited (translated to English). |
|
|
|
10.8 |
|
Maximum Amount Comprehensive Credit Line Contract dated June 21, 2013 by and between Bank of Jiangsu, Shenzhen Sub-branch and Shenzhen Highpower Technology Company Limited and corresponding guarantee contracts (translated to English) (incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2013). |
|
|
|
10.8(a) |
|
Working Capital Loan Contract dated July 25, 2013 by and between Bank of Jiangsu, Shenzhen Sub-branch and Shenzhen Highpower Technology Company Limited (translated to English) (incorporated by reference from Exhibit 10.2 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2013). |
|
|
|
10.9 |
|
Comprehensive Credit Line Contract dated June 21, 2013 by and between Bank of Jiangsu, Shenzhen Sub-branch and Springpower Technology (Shenzhen) Company Limited and corresponding guarantee contracts (translated to English) (incorporated by reference from Exhibit 10.8 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2013). |
10.9(a) |
|
Working Capital Loan Contract dated September 26, 2013 by and between Bank of Jiangsu, Shenzhen Sub-branch and Springpower Technology (Shenzhen) Company Limited (translated to English) (incorporated by reference from Exhibit 10.9 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2013). |
|
|
|
10.10 |
|
Comprehensive Credit Line Contract dated March 29, 2013 by and between China CITIC Bank Shenzhen Branch and Shenzhen Highpower Technology Company Limited and corresponding guarantee agreements (translated to English) (incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2013). |
|
|
|
10.11 |
|
Credit Contract dated March 14, 2013 by and between Industrial and Commercial Bank of China(Macau) Limited and HongKong Highpower Technology Company Limited (incorporated by reference from Exhibit 10.4 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2013). |
|
|
|
10.11(a) |
|
Working Capital Loan Contract dated July 29, 2013 by and between Industrial and Commercial Bank of China (Macau) Limited and Hong Kong Highpower Technology Company Limited (incorporated by reference from Exhibit 10.10 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2013). |
|
|
|
10.12 |
|
Comprehensive Credit Line Contract dated January 10, 2013 by and between Bank of China Buji Sub-Branch and Shenzhen Highpower Technology Company Limited and corresponding guarantee and pledge agreements (translated to English) (incorporated by reference from Exhibit 10.2 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2013). |
|
|
|
10.13* |
|
2008 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Registrant’s definitive Proxy Statement on Schedule 14A (file no. 001-34098) filed with the Securities and Exchange Commission on October 31, 2008). |
|
|
|
10.13(a)* |
|
Form of Stock Option Agreement for 2008 Omnibus Incentive Plan (incorporated by reference to Exhibit 4.2 of Form S-8 (file no.: 333-157443) filed with the Securities and Exchange Commission on February 20, 2009). |
|
|
|
10.13(b)* |
|
Form of Restricted Stock Agreement for 2008 Omnibus Incentive Plan (incorporated by reference to Exhibit 4.3 of Form S-8 (file no.: 333-157443) filed with the Securities and Exchange Commission on February 20, 2009). |
|
|
|
10.13(c)* |
|
Form of Restricted Stock Unit Agreement for 2008 Omnibus Incentive Plan (incorporated by reference to Exhibit 4.4 of Form S-8 (file no.: 333-157443) filed with the Securities and Exchange Commission on February 20, 2009). |
|
|
|
10.14 |
|
Land Use Right Agreement dated January 5, 2012 by and between Ganzhou Land and Resource Bureau and Ganzhou Highpower Technology Company Limited (translated to English) (incorporated by reference from Exhibit 10.5 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2012). |
|
|
|
10.15 |
|
Working Capital Loan Contract dated August 26, 2013 by and between Shanghai Commercial & Savings Bank Limited, Hong Kong Branch and Hong Kong Highpower Technology Company Limited (incorporated by reference from Exhibit 10.11 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2013). |
10.16 |
|
Working Capital Loan Contract dated September 5, 2013 by and between Bank of China Everbright Bank and Springpower Technology (Shenzhen) Company Limited (translated to English) (incorporated by reference from Exhibit 10.7 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2013). |
|
|
|
10.17 |
|
Comprehensive Credit Line Contract dated July 24, 2013 by and between Industrial Bank Co., Ltd. and Springpower Technology (Shenzhen) Company Limited and corresponding guarantee contracts (translated to English) (incorporated by reference from Exhibit 10.4 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2013). |
|
|
|
10.18 |
|
Form of Securities Purchase Agreement, dated as of April 14, 2014, by and between Highpower International, Inc. and the investors in the offering (incorporated by reference exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2014). |
|
|
|
10.19 |
|
Working Capital Loan Contract dated January 16, 2014 by and between Bank of China, Buji Sub-branch and Springpower Technology (Shenzhen) Company Limited (translated to English) (incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2014). |
|
|
|
10.20 |
|
Comprehensive Credit Line Contract dated March 10, 2014 by and between Bank of China, Buji-Sub-branch and Shenzhen Highpower Technology Co., Ltd (translated to English) (incorporated by reference from Exhibit 10.2 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2014). |
|
|
|
10.20(a) |
|
Maximum Amount Guaranty Contract dated March 10, 2014 by and between Bank of China, Buji- Sub-branch and Springpower Technology (Shenzhen) Company Limited (translated to English) (incorporated by reference from Exhibit 10.2(a) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2014). |
|
|
|
10.20(b) |
|
Maximum Amount Guaranty Contract dated March 10, 2014 by and between Bank of China, Buji- Sub-branch and Dangyu Pan (translated to English) (incorporated by reference from Exhibit 10.2(b) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2014). |
|
|
|
10.20(c) |
|
Collateral Contract dated March 10, 2014 by and between Bank of China, Buji- Sub-branch and Shenzhen Highpower Technology Co., Ltd (translated to English) (incorporated by reference from Exhibit 10.2(c) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2014). |
|
|
|
10.20(d) |
|
Collateral Contract dated March 10, 2014 by and between Bank of China, Buji- Sub-branch and Shenzhen Highpower Technology Co., Ltd (translated to English) (incorporated by reference from Exhibit 10.2(d) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2014). |
|
|
|
10.20(e) |
|
Collateral Contract dated March 10, 2014 by and between Bank of China, Buji- Sub-branch and Shenzhen Highpower Technology Co., Ltd (translated to English) (incorporated by reference from Exhibit 10.2(e) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2014). |
|
|
|
10.21 |
|
Working Capital Loan Contract dated April 14, 2014 by and between Bank of China, Buji Sub-branch and Springpower Highpower (Shenzhen)Technology Co., Ltd (translated to English)(incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2014). |
|
|
|
10.22 |
|
Comprehensive Credit Line Contract dated May 22, 2014 by and between China Minsheng Banking Co., Ltd. Shenzhen Branch and Shenzhen Highpower Technology Co., Ltd (translated to English)(incorporated by reference from Exhibit 10.2 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2014). |
10.22(a) |
|
Maximum Amount Guaranty Contract dated May 22, 2014 by and between China Minsheng Banking Co., Ltd. Shenzhen Branch and Springpower Technology (Shenzhen) Co., Ltd (translated to English)(incorporated by reference from Exhibit 10.2(a) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2014). |
|
|
|
10.22(b) |
|
Maximum Amount Guaranty Contract dated May 22, 2014 by and between China Minsheng Banking Co., Ltd. Shenzhen Branch and Dangyu Pan (translated to English)(incorporated by reference from Exhibit 10.2(b) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2014). |
|
|
|
10.22(c) |
|
Maximum Amount Guaranty Contract dated May 22, 2014 by and between China Minsheng Banking Co., Ltd. Shenzhen Branch and Huizhou Highpower Technology Co., Ltd (translated to English)(incorporated by reference from Exhibit 10.2(c) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2014). |
|
|
|
10.23 |
|
Trade Financing Contract dated May 22, 2014 by and between China Minsheng Banking Co., Ltd. Shenzhen Branch and Shenzhen Highpower Technology Co., Ltd (translated to English)(incorporated by reference from Exhibit 10.3 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2014). |
|
|
|
10.24 |
|
Comprehensive Credit Line Contract dated June 4, 2014 by and between China Citic Bank, Shenzhen Branch and Both Shenzhen Highpower Technology Co., Ltd and Springpower Technology (Shenzhen) Co., Ltd (translated to English)(incorporated by reference from Exhibit 10.4 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2014). |
|
|
|
10.24(a) |
|
Maximum Amount Guaranty Contract dated June 25, 2014 by and between China Citic Bank, Shenzhen Branch and Springpower Technology (Shenzhen) Co., Ltd (translated to English)(incorporated by reference from Exhibit 10.4(a) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2014). |
|
|
|
10.24(b) |
|
Maximum Amount Guaranty Contract dated June 25, 2014 by and between China Citic Bank, Shenzhen Branch and Shenzhen Highpower Technology Co., Ltd (translated to English)(incorporated by reference from Exhibit 10.4(b) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2014). |
|
|
|
10.24(c) |
|
Maximum Amount Guaranty Contract dated June 25, 2014 by and between China Citic Bank, Shenzhen Branch and Huizhou Highpower Technology Co., Ltd (translated to English)(incorporated by reference from Exhibit 10.4(c) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2014). |
|
|
|
10.24(d) |
|
Maximum Amount Guaranty Contract dated June 25, 2014 by and between China Citic Bank, Shenzhen Branch and Dangyu Pan (translated to English)(incorporated by reference from Exhibit 10.4(d) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2014). |
|
|
|
10.25 |
|
Working Capital Loan Contract dated June 4, 2014 by and between China Construction Bank (Asia) and Hong Kong Highpower Technology Co., Ltd (translated to English)(incorporated by reference from Exhibit 10.5 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2014). |
|
|
|
10.26 |
|
Comprehensive Credit Line Contract dated July 23, 2014 between Springpower Technology (Shenzhen) Co. Ltd. and Bank of China, Buji Sub-branch (translated to English)(incorporated by reference from Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2014). |
|
|
|
10.26(a) |
|
Maximum Amount Guaranty Contract dated July 23, 2014 between Shenzhen Highpower Technology Co. Ltd. and Bank of China, Buji Sub-branch (translated to English)(incorporated by reference from Exhibit 10.1(a) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2014). |
10.26(b) |
|
Maximum Amount Guaranty Contract dated July 23, 2014 between Huizhou Highpower Technology (Shenzhen) Co., Ltd. and Bank of China, Buji Sub-branch (translated to English)(incorporated by reference from Exhibit 10.1(b) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2014). |
|
|
|
10.26(c) |
|
Maximum Amount Guaranty Contract dated July 23, 2014 between Dangyu Pan and Bank of China, Buji Sub-branch (translated to English)(incorporated by reference from Exhibit 10.1(c) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2014). |
|
|
|
10.26(d) |
|
Maximum Amount Guaranty Contract dated July 23, 2014 between Wenliang Li and Bank of China, Buji Sub-branch (translated to English)(incorporated by reference from Exhibit 10.1(d) to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2014). |
|
|
|
10.27 |
|
Working Capital Loan Contract dated July 14, 2014 between Shenzhen Highpower Technology Co., Ltd. and Bank of China, Buji Sub-branch (translated to English)(incorporated by reference from Exhibit 10.2 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2014). |
|
|
|
10.28 |
|
Working Capital Loan Contract dated August 7, 2014 between Springpower Technology (Shenzhen) Co. Ltd. and Bank of China, Buji Sub-branch (translated to English)(incorporated by reference from Exhibit 10.3 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2014). |
|
|
|
10.29 |
|
Banking Facility and Guaranty dated August 19, 2014 between Hong Kong Highpower Technology Company Limited and The Shanghai Commercial & Savings Bank, LTD(incorporated by reference from Exhibit 10.4 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2014). |
|
|
|
21.1 |
|
List of Subsidiaries (incorporated by reference from Exhibit 21.1 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2012). |
|
|
|
23.1 |
|
Consent of Marcum Bernstein & Pinchuk LLP. |
|
|
|
31.1 |
|
Certification of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2 |
|
Certification of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1** |
|
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS |
|
XBRL Instance Document |
101.SCH |
|
XBRL Taxonomy Extension Schema Document |
101.CAL |
|
XBRL Taxonomy Extension Calculation Link base Document |
101.DEF |
|
XBRL Taxonomy Extension Definition Link base Document |
101.LAB |
|
XBRL Taxonomy Extension Label Link base Document |
101.PRE |
|
XBRL Taxonomy Extension Presentation Link base Document |
* |
Denotes a management contract or compensatory plan. |
** |
This exhibit shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or
otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective
of any general incorporation language in any filings. |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014
AND 2013
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public
Accounting Firm
To the Board of Directors and Shareholders of
Highpower International, Inc.
We have audited the accompanying consolidated
balance sheets of Highpower International, Inc. and Subsidiaries (together the “Company”) as of December
31, 2014 and 2013, and the related consolidated statements of operations and comprehensive income, changes in equity and cash
flows (together the “consolidated financial statements”) for the years ended December 31, 2014 and 2013. These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the consolidated financial positions of the Company as
of December 31, 2014 and 2013, and the consolidated results of their operations and their cash flows for the years ended December
31, 2014 and 2013 in conformity with accounting principles generally accepted in the United States of America.
/s/ Marcum Bernstein & Pinchuk llp
New York, New York
March 30, 2015
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars except Number of
Shares)
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
ASSETS | |
| | | |
| | |
Current Assets: | |
| | | |
| | |
Cash and cash equivalents | |
| 14,611,892 | | |
| 7,973,459 | |
Restricted cash | |
| 15,396,827 | | |
| 28,586,121 | |
Accounts receivable, net | |
| 32,316,607 | | |
| 33,961,014 | |
Notes receivable | |
| 621,110 | | |
| 1,014,891 | |
Prepayments | |
| 3,283,520 | | |
| 4,969,743 | |
Other receivables | |
| 665,828 | | |
| 1,063,656 | |
Inventories | |
| 22,268,069 | | |
| 19,739,360 | |
| |
| | | |
| | |
Total Current Assets | |
| 89,163,853 | | |
| 97,308,244 | |
| |
| | | |
| | |
Property, plant and equipment, net | |
| 50,437,718 | | |
| 48,548,203 | |
Land use right, net | |
| 4,305,317 | | |
| 4,421,415 | |
Intangible asset, net | |
| 600,000 | | |
| 650,000 | |
Deferred tax assets | |
| 1,647,184 | | |
| 802,225 | |
Foreign currency derivatives assets | |
| - | | |
| 63,289 | |
| |
| | | |
| | |
TOTAL ASSETS | |
| 146,154,072 | | |
| 151,793,376 | |
| |
| | | |
| | |
LIABILITIES AND EQUITY | |
| | | |
| | |
| |
| | | |
| | |
LIABILITIES | |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Accounts payable | |
| 44,562,647 | | |
| 40,026,698 | |
Deferred income | |
| 1,887,409 | | |
| 675,521 | |
Short-term loan | |
| 15,195,040 | | |
| 36,142,105 | |
Notes payable | |
| 29,903,248 | | |
| 25,271,256 | |
Other payables and accrued liabilities | |
| 5,896,547 | | |
| 7,801,431 | |
Income taxes payable | |
| 1,968,656 | | |
| 1,279,658 | |
Current portion of long-term loan | |
| 1,959,248 | | |
| 1,967,536 | |
| |
| | | |
| | |
Total Current Liabilities | |
| 101,372,795 | | |
| 113,164,205 | |
| |
| | | |
| | |
Warrant Liability | |
| 1,067,674 | | |
| - | |
Long-term loan | |
| 1,959,247 | | |
| 3,935,071 | |
| |
| | | |
| | |
TOTAL LIABILITIES | |
| 104,399,716 | | |
| 117,099,276 | |
| |
| | | |
| | |
COMMITMENTS AND CONTINGENCIES | |
| - | | |
| - | |
HIGHPOWER INTERNATIONAL, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Stated in US Dollars except Number of
Shares)
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
| |
| | |
| |
EQUITY | |
| | | |
| | |
Stockholders’ equity | |
| | | |
| | |
Preferred stock | |
| | | |
| | |
(Par value: $0.0001, Authorized: 10,000,000 shares, Issued and outstanding: none) | |
| - | | |
| - | |
| |
| | | |
| | |
Common stock | |
| | | |
| | |
(Par value: $0.0001, Authorized: 100,000,000 shares, 15,084,746 shares issued and outstanding at December 31, 2014 and 13,978,106 shares issued and outstanding at December 31, 2013) | |
| 1,508 | | |
| 1,398 | |
Additional paid-in capital | |
| 10,530,430 | | |
| 6,011,305 | |
Statutory and other reserves | |
| 3,611,501 | | |
| 3,142,411 | |
Retained earnings | |
| 20,675,021 | | |
| 18,390,875 | |
Accumulated other comprehensive income | |
| 5,628,657 | | |
| 5,848,859 | |
| |
| | | |
| | |
Total equity for the Company’s stockholders | |
| 40,447,117 | | |
| 33,394,848 | |
| |
| | | |
| | |
Non-controlling interest | |
| 1,307,239 | | |
| 1,299,252 | |
| |
| | | |
| | |
TOTAL EQUITY | |
| 41,754,356 | | |
| 34,694,100 | |
| |
| | | |
| | |
TOTAL LIABILITIES AND EQUITY | |
| 146,154,072 | | |
| 151,793,376 | |
See notes to consolidated financial statements
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Stated in US Dollars)
| |
For the years ended December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
| |
| | |
| |
Net sales | |
| 147,088,166 | | |
| 132,849,822 | |
Cost of sales | |
| (116,937,363 | ) | |
| (106,465,780 | ) |
Gross profit | |
| 30,150,803 | | |
| 26,384,042 | |
| |
| | | |
| | |
Research and development expenses | |
| (7,709,618 | ) | |
| (5,711,269 | ) |
Selling and distribution expenses | |
| (6,551,755 | ) | |
| (6,188,176 | ) |
General and administrative expenses | |
| (12,893,378 | ) | |
| (12,092,708 | ) |
Foreign currency transaction gain (loss) | |
| 273,900 | | |
| (552,669 | ) |
Gain (loss) on derivative instruments | |
| (54,406 | ) | |
| 326,222 | |
Total operating expenses | |
| (26,935,257 | ) | |
| (24,218,600 | ) |
| |
| | | |
| | |
Income from operations | |
| 3,215,546 | | |
| 2,165,442 | |
| |
| | | |
| | |
Gain on change of fair value of warrant liability | |
| 106,278 | | |
| - | |
Other income | |
| 1,707,516 | | |
| 1,538,518 | |
Interest expenses | |
| (1,838,155 | ) | |
| (1,647,155 | ) |
Income before taxes | |
| 3,191,185 | | |
| 2,056,805 | |
| |
| | | |
| | |
Income taxes expenses | |
| (590,318 | ) | |
| (718,016 | ) |
Net income | |
| 2,600,867 | | |
| 1,338,789 | |
| |
| | | |
| | |
Less: net loss attributable to non-controlling interest | |
| (152,369 | ) | |
| (112,429 | ) |
Net income attributable to the Company | |
| 2,753,236 | | |
| 1,451,218 | |
| |
| | | |
| | |
Comprehensive income | |
| | | |
| | |
Net income | |
| 2,600,867 | | |
| 1,338,789 | |
Foreign currency translation gain (loss) | |
| (156,926 | ) | |
| 822,600 | |
Comprehensive income | |
| 2,443,941 | | |
| 2,161,389 | |
| |
| | | |
| | |
Less: comprehensive loss attributable to non-controlling interest | |
| (89,093 | ) | |
| (88,824 | ) |
Comprehensive income attributable to the Company | |
| 2,533,034 | | |
| 2,250,213 | |
| |
| | | |
| | |
Earnings per share of common stock attributable to the Company | |
| | | |
| | |
- Basic | |
| 0.19 | | |
| 0.11 | |
- Diluted | |
| 0.18 | | |
| 0.11 | |
| |
| | | |
| | |
Weighted average number of common stock outstanding | |
| | | |
| | |
- Basic | |
| 14,739,073 | | |
| 13,671,169 | |
- Diluted | |
| 15,154,239 | | |
| 13,687,698 | |
See notes to consolidated financial statements
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
(Stated in US Dollars except Number of
Shares)
| |
| | |
| | |
| | |
| | |
| | |
Accumulated | | |
| | |
| |
| |
| | |
Common
stock | | |
| | |
Statutory | | |
| | |
other | | |
| | |
| |
| |
Preferred
stock | | |
Shares | | |
Amount | | |
Additional
paid-in capital | | |
and
other reserves | | |
Retained
earnings | | |
comprehensive
income | | |
Non-controlling
interest | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance, December 31, 2012 | |
| - | | |
| 13,582,106 | | |
| 1,358 | | |
| 6,035,230 | | |
| 2,790,484 | | |
| 17,291,584 | | |
| 5,049,864 | | |
| 805,600 | | |
| 31,974,120 | |
Change in non-controlling interest | |
| - | | |
| - | | |
| - | | |
| (582,476 | ) | |
| - | | |
| - | | |
| - | | |
| 582,476 | | |
| - | |
Foreign currency translation adjustments | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 798,995 | | |
| 23,605 | | |
| 822,600 | |
Share-based compensation expenses | |
| - | | |
| 396,000 | | |
| 40 | | |
| 558,551 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 558,591 | |
Transfer to statutory and other reserves | |
| - | | |
| - | | |
| - | | |
| - | | |
| 351,927 | | |
| (351,927 | ) | |
| - | | |
| - | | |
| - | |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,451,218 | | |
| - | | |
| (112,429 | ) | |
| 1,338,789 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31, 2013 | |
| - | | |
| 13,978,106 | | |
| 1,398 | | |
| 6,011,305 | | |
| 3,142,411 | | |
| 18,390,875 | | |
| 5,848,859 | | |
| 1,299,252 | | |
| 34,694,100 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Proceeds from stock issuance, net | |
| | | |
| 1,000,000 | | |
| 100 | | |
| 3,459,112 | | |
| | | |
| | | |
| | | |
| | | |
| 3,459,212 | |
Change in non-controlling interest | |
| - | | |
| - | | |
| - | | |
| (97,080 | ) | |
| - | | |
| - | | |
| - | | |
| 97,080 | | |
| - | |
Foreign currency translation adjustments | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (220,202 | ) | |
| 63,276 | | |
| (156,926 | ) |
Share-based compensation expenses | |
| - | | |
| 106,640 | | |
| 10 | | |
| 1,157,093 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,157,103 | |
Transfer to statutory and other reserves | |
| - | | |
| - | | |
| - | | |
| - | | |
| 469,090 | | |
| (469,090 | ) | |
| - | | |
| - | | |
| - | |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,753,236 | | |
| - | | |
| (152,369 | ) | |
| 2,600,867 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, December 31, 2014 | |
| - | | |
| 15,084,746 | | |
| 1,508 | | |
| 10,530,430 | | |
| 3,611,501 | | |
| 20,675,021 | | |
| 5,628,657 | | |
| 1,307,239 | | |
| 41,754,356 | |
See notes to consolidated financial statements
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in US Dollars)
| |
For the years ended December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Cash flows from operating activities | |
| | | |
| | |
Net income | |
| 2,600,867 | | |
| 1,338,789 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 4,201,533 | | |
| 2,523,583 | |
Allowance for doubtful accounts | |
| 768 | | |
| 483,586 | |
Loss on disposal of property, plant and equipment | |
| 227,264 | | |
| 263,454 | |
Loss on derivative instruments | |
| 62,801 | | |
| 194,892 | |
Deferred income tax | |
| (845,068 | ) | |
| (23,410 | ) |
Share based payment | |
| 1,288,916 | | |
| 426,779 | |
Gain on change of fair value of warrant liability | |
| (106,278 | ) | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| 1,472,589 | | |
| (8,511,464 | ) |
Notes receivable | |
| 388,137 | | |
| (605,229 | ) |
Prepayments | |
| 1,661,111 | | |
| (1,656,526 | ) |
Other receivable | |
| 391,965 | | |
| (239,801 | ) |
Inventories | |
| (2,602,659 | ) | |
| (2,618,611 | ) |
Accounts payable | |
| 5,672,372 | | |
| 14,566,891 | |
Deferred income | |
| 1,880,776 | | |
| - | |
Other payables and accrued liabilities | |
| (1,867,493 | ) | |
| 3,178,758 | |
Income taxes payable | |
| 691,949 | | |
| 72,509 | |
Net cash flows provided by operating activities | |
| 15,119,550 | | |
| 9,394,200 | |
| |
| | | |
| | |
Cash flows from investing activities | |
| | | |
| | |
Acquisition of plant and equipment | |
| (8,881,328 | ) | |
| (19,981,373 | ) |
Net cash flows used in investing activities | |
| (8,881,328 | ) | |
| (19,981,373 | ) |
| |
| | | |
| | |
Cash flows from financing activities | |
| | | |
| | |
Proceeds from short-term bank loans | |
| 20,346,228 | | |
| 34,088,599 | |
Repayment of short-term bank loans | |
| (41,122,204 | ) | |
| (18,770,730 | ) |
Repayment of long-term bank loans | |
| (1,952,362 | ) | |
| (1,937,987 | ) |
Proceeds from notes payable | |
| 52,258,487 | | |
| 45,285,470 | |
Repayment of notes payable | |
| (47,536,694 | ) | |
| (46,960,375 | ) |
Proceeds from issuance of capital stock and warrants, net | |
| 4,633,164 | | |
| - | |
Change in restricted cash | |
| 13,038,071 | | |
| (350,756 | ) |
Net cash flows provided by (used in) financing activities | |
| (335,310 | ) | |
| 11,354,221 | |
Effect of foreign currency translation on cash and cash equivalents | |
| 735,521 | | |
| 579,077 | |
Net increase in cash and cash equivalents | |
| 6,638,433 | | |
| 1,346,125 | |
Cash and cash equivalents - beginning of year | |
| 7,973,459 | | |
| 6,627,334 | |
Cash and cash equivalents - end of year | |
| 14,611,892 | | |
| 7,973,459 | |
| |
| | | |
| | |
Supplemental disclosures for cash flow information: | |
| | | |
| | |
Cash paid for: | |
| | | |
| | |
Income taxes | |
| 743,437 | | |
| 668,917 | |
Interest expenses | |
| 1,912,584 | | |
| 1,647,155 | |
Non-cash transactions | |
| | | |
| | |
Accounts payable for construction in progress | |
| - | | |
| 1,294,963 | |
Reduction of property, plant and equipment cost by realizing deferred income | |
| 672,675 | | |
| - | |
See notes to consolidated financial statements
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| 1. | Principal activities and organization |
The consolidated financial statements
include the financial statements of Highpower International, Inc. ("Highpower") and its subsidiaries, Hong Kong Highpower
Technology Company Limited ("HKHTC"), Shenzhen Highpower Technology Company Limited ("SZ Highpower"), Highpower
Energy Technology (Huizhou) Company Limited ("HZ Highpower"), Springpower Technology (Shenzhen) Company Limited ("SZ
Springpower"), Ganzhou Highpower Technology Company Limited ("GZ Highpower"), Icon Energy System Company Limited
("ICON") and Huizhou Highpower Technology Co., Ltd (HZ HTC). Highpower and its subsidiaries are collectively referred
to as the "Company".
Highpower was incorporated in
the State of Delaware on January 3, 2006. HKHTC was incorporated in Hong Kong on July 4, 2003. All other subsidiaries are incorporated
in the People’s Republic of China (“PRC”).
On May 15, 2013, GZ Highpower
increased its paid-in capital from RMB15,000,000 ($2,381,293) to RMB30,000,000 ($4,807,847).SZ Highpower holds 60% of the equity
interest of GZ Highpower, and four founding management members of GZ Highpower hold the remaining 40%.On November 13, 2014, GZ
Highpower increased its paid-in capital from RMB30,000,000 ($4,898,119) to RMB40,000,000 ($6,530,825) and the additional capital
of RMB10,000,000 was contributed by SZ Highpower. As of December 31, 2014, SZ Highpower holds 70% of the equity interest of GZ
Highpower, and four founding management members of GZ Highpower hold the remaining 30%.
In April 2014, the Company and
certain institutional investors entered into a securities purchase agreement, pursuant to which the Company sold 1,000,000 shares
of common stock and warrants exercisable for 500,000 shares of common stock in a registered direct offering at a price of $5.05
per fixed combination for aggregate proceeds of $5.05 million. The shares and warrants were sold in multiples of a fixed combination
consisting of (i) one share of common stock and (ii) one immediately exercisable warrant to purchase 0.50 shares of common stock.
The net proceeds from the offering was $4,633,164, after deducting fees due the placement agent and offering expenses.
The subsidiaries of the Company
and their principal activities are described as follows:
Name of company |
|
Place and date
incorporation |
|
Attributable equity
interest held |
|
Principal activities |
Hong Kong Highpower Technology Co., Ltd
("HKHTC") |
|
Hong Kong
July 4, 2003 |
|
100% |
|
Investment holding and marketing of batteries |
|
|
|
|
|
|
|
Shenzhen Highpower Technology Co., Ltd
("SZ Highpower") |
|
PRC
October 8, 2002 |
|
100% |
|
Manufacturing & marketing of batteries |
|
|
|
|
|
|
|
Highpower Energy Technology (Huizhou) Co., Ltd
("HZ Highpower") |
|
PRC
January 29, 2008 |
|
100% |
|
Inactive |
|
|
|
|
|
|
|
Springpower Technology (Shenzhen) Co., Ltd
("SZ Springpower") |
|
PRC
June 4, 2008 |
|
100% |
|
Research & manufacturing of batteries |
|
|
|
|
|
|
|
Ganzhou Highpower Technology Co., Ltd
("GZ Highpower") |
|
PRC
September 21, 2010 |
|
70% |
|
Processing, marketing and research of battery materials |
|
|
|
|
|
|
|
Icon Energy System Co., Ltd.
("ICON") |
|
PRC
February 23, 2011 |
|
100% |
|
Research and production of advanced battery packs and systems |
|
|
|
|
|
|
|
Huizhou Highpower Technology Co.,
Ltd
("HZ HTC") |
|
PRC
March 8, 2012 |
|
100% |
|
Manufacturing & marketing of batteries |
HIGHPOWER INTERNATIONAL, INCAND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| 2. | Summary of significant accounting policies |
Basis of presentation
The consolidated financial statements
have been prepared in accordance with the United States generally accepted accounting principles ("U.S. GAAP").
Consolidation
The consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant inter-company accounts and transactions have been eliminated
in consolidation. Non-controlling interests represent the equity interest in the GZ Highpower that is not attributable to the Company.
Use of estimates
The preparation of financial
statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates
and assumptions include revenues; the allowance for doubtful receivables; recoverability of the carrying amount of inventory; fair
values of financial instruments; and the assessment of deferred tax assets or liabilities. These estimates are often based on complex
judgments and assumptions that management believes to be reasonable but are inherently uncertain
and unpredictable. Actual results could differ from these estimates.
Concentrations of credit risk
Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist principally of accounts receivable. The Company extends
credit based on an evaluation of the customer’s financial condition, generally without requiring collateral or other security.
In order to minimize the credit risk, the management of the Company has delegated a team responsible for determining credit limits,
credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. Further, the
Company reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment
losses are made for irrecoverable amounts. In this regard, the management of the Company considers that the Company’s credit
risk is significantly reduced.
During the year ended December
31, 2014, no customer accounted for 10% or more of total net sales. One customer accounted for 10.8% in the year ended December
31, 2013.
During the year ended December
31, 2014, no supplier accounted for 10% or more of total purchase amount. One supplier accounted for 12.8% in the year ended December
31, 2013.
None of the Company’s customers
accounted for 10% or more of the accounts receivable as of December 31, 2014 and December 31, 2013.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| 2. | Summary of significant accounting policies (continued) |
Cash and cash equivalents
Cash and cash equivalents include
all cash, deposits in banks and other liquid investments with initial maturities of three months or less.
Restricted cash
Restricted cash include time
deposits and cash security for bank acceptance bills.
Accounts receivable
Accounts receivable are stated
at the original amount less an allowance for doubtful receivables, if any, based on a review of all outstanding amounts at period
end. An allowance is also made when there is objective evidence that the Company will not be able to collect all amounts due according
to the original terms of the receivables. Bad debts are written off when identified. The Company extends unsecured credit to customers
in the normal course of business and believes all accounts receivable in excess of the allowances for doubtful receivables to be
fully collectible. The Company does not accrue interest on trade accounts receivable.
Notes receivable
Notes receivable represent banks’
acceptances that have been arranged with third-party financial institutions by certain customers to settle their purchases from
us. These banks’ acceptances are non-interest bearing and are collectible within six months.
Inventories
Inventories are stated at lower
of cost or market. Cost is determined using the weighted average method. Inventory includes raw materials, packing materials, consumables,
work in progress and finished goods. The variable production overhead is allocated to each unit of production on the basis of the
actual use of the production facilities. The allocation of fixed production overhead to the costs of conversion is based on the
normal capacity of the production facilities.
Property, plant and equipment
Property, plant and equipment
are stated at cost less accumulated depreciation. Cost represents the purchase price of the asset and other costs incurred to bring
the asset into its existing use. Maintenance, repairs and betterments, including replacement of minor items, are charged to expense;
major additions to physical properties are capitalized.
Depreciation of property, plant
and equipment is provided using the straight-line method over their estimated useful lives at the following annual rates:
Buildings | |
| 2.5%-5 | % |
Furniture, fixtures and office equipment | |
| 20 | % |
Leasehold improvement | |
| 20%-50 | % |
Machinery and equipment | |
| 10 | % |
Motor vehicles | |
| 20 | % |
Upon sale or disposal, the applicable
amounts of asset cost and accumulated depreciation are removed from the accounts and the net amount less proceeds from disposal
is charged or credited to income.
Construction in progress represents
capital expenditures for direct costs of construction or acquisition and design fees incurred, and the interest expenses directly
related to the construction. Capitalization of these costs ceases and the construction in progress is transferred to the appropriate
category of property, plant and equipment when substantially all the activities necessary to prepare the assets for their intended
use are completed. Construction in progress is not depreciated.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| 2. | Summary of significant accounting policies (continued) |
Land use
rights, net
Land use rights represent payments
for the rights to use certain parcels of land for a certain period of time in the PRC Land use rights are carried at cost and charged
to expense on a straight-line basis over the period the rights are granted.
Intangible
assets
Intangible assets represent a
royalty-bearing, non-exclusive license to use certain patents owned by Ovonic Battery Company, Inc. (Ovonic), an unrelated party,
to manufacture rechargeable nickel metal hydride batteries for portable consumer applications (“Consumer Batteries”)
in the PRC, and a royalty-bearing, non-exclusive worldwide license to use certain patents owned by Ovonic to manufacture, sell
and distribute Consumer Batteries. The value of the licenses was established based on historic acquisition costs.
An exclusive proprietary technology
contributed by the four founding management members of GZ Highpower in exchange for the paid-in capital of GZ Highpower is recorded
at the four management members’ historical cost basis of nil.
Intangible assets are amortized
over their estimated useful lives, and are reviewed annually for impairment, or more frequently, if indications of possible impairment
exist.
Government grants
Government grants are recognized
when received and all the conditions for their receipt have been met.
Specifically, government grants
whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets is recognized on
the consolidated balance sheet as deferred income and deducted in calculating the carrying amount of the related asset. The revenue
from such grants is recognized in profit or loss over the life of the related depreciable asset as a reduction of depreciation
expense. As of December 31, 2014 and 2013, the Company recorded deferred income of $1,887,409 and $657,521, respectively, for the
government grants to purchase non-current assets.
Government grants as compensation
for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future
related benefit are recognized as other income in the period in which they become receivable. Approximately $330,302 and $523,243
government grant were recognized as other income in 2014 and 2013, respectively.
Revenue recognition
The Company recognizes revenue
when persuasive evidence of an arrangement exists, the sales price is fixed or determinable, delivery of the product has occurred,
title and risk of loss have transferred to the customers and collectability of the receivable is reasonably assured. The majority
of domestic sales contracts transfer title and risk of loss to customers upon receipt. The majority of oversea sales contracts
transfer title and risk of loss to customers when goods were delivered to the carriers. Revenue is presented net of any sales tax
and value added tax.
The Company does not have arrangements
for returns from customers and does not have any future obligations directly or indirectly related to product resale by customers.
The Company has no sales incentive programs.
Cost of Sales
Cost of revenues consists primarily
of material costs, employee compensation, depreciation and related expenses, which are directly attributable to the production
of products. Write-down of inventories to lower of cost or market is also recorded in cost of revenues.
Shipping and handling
Shipping and handling expenses
are recorded as selling expenses when occurred. Shipping and handling expenses relating to sales were $971,240 and $843,146 respectively
for the years ended December 31, 2014 and 2013.
Research and development
Research and development expenses
include expenses directly attributable to the conduct of research and development programs, including the expenses of salaries,
employee benefits, materials, supplies, and maintenance of research equipment. All expenses associated with research and development
are expensed as incurred.
Advertising
Advertising which generally
represents the cost of promotions to create or stimulate a positive image of the Company or a desire to buy the Company’s
products and services, are expensed as incurred. No significant advertising expense was recorded for the years ended December 31,
2014 and 2013.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| 2. | Summary of significant accounting policies (continued) |
Share-Based Compensation
The Company recognizes compensation
expense associated with the issuance of equity instruments to employees for their services. The fair value of the equity instruments
is estimated on the date of grant and is expensed in the financial statements over the vesting period. The input assumptions used
in determining fair value are the expected life, expected volatility, risk-free rate and the dividend yield.
Share-based compensation associated
with the issuance of equity instruments to non-employees is measured at the fair value of the equity instrument issued or committed
to be issued, as this is more reliable than the fair value of the services received. The fair value is measured at the date that
the commitment for performance by the counterparty has been reached or the counterparty's performance is complete.
Income taxes
The Company recognizes deferred
tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences
between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws
and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
Uncertain tax positions
The Company accounts for uncertainty
in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the
tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that
the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step
is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. The Company
classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt)
of cash within one year. Interest and penalties related to uncertain tax positions are recognized and recorded as necessary in
the provision for income taxes. There were no uncertain tax positions as of December 31, 2014 and 2013.
Comprehensive income
Recognized revenue, expenses,
gains and losses are included in net income or loss. Although certain changes in assets and liabilities are reported as separate
components of the equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive
income or loss. The components of other comprehensive income or loss are consisted solely of foreign currency translation adjustments,
net of the income tax effect.
Foreign currency translation and transactions
Highpower’s functional
currency is the United States dollar ("US$"). HKHTC's functional currency is the Hong Kong dollar ("HK$").
The functional currency of the Company’s subsidiaries in the PRC is the Renminbi ("RMB").
Most of the Company’s
oversea sales are priced and settled with US$. At the date a foreign currency transaction is recognized, each asset, liability,
revenue, expense, gain, or loss arising from the transaction is measured initially in the functional currency of the recording
entity by use of the exchange rate in effect at that date. The increase or decrease in expected functional currency cash flows
upon settlement of a transaction resulting from a change in exchange rates between the functional currency and the currency in
which the transaction is denominated is recognized as foreign currency transaction gain or loss that is included in determining
net income for the period in which the exchange rate changes. At each balance sheet date, recorded balances that are denominated
in a foreign currency are adjusted to reflect the current exchange rate.
The Company’s reporting
currency is US$. Assets and liabilities of HKHTC and the PRC subsidiaries are translated at the current exchange rate at the balance
sheet dates, revenues and expenses are translated at the average exchange rates during the reporting periods, and equity accounts
are translated at historical rates. Translation adjustments are reported in other comprehensive income.
Segment Reporting
The Company uses the “management
approach” in determining reportable operating segments. The management approach considers the internal organization and reporting
used by the Company's chief operating decision maker for making operating decisions and assessing performance as the source for
determining the Company's reportable segments. The company’s reportable segments are based on products, geography, legal
structure, management structure, or any other manner in which management disaggregates a company. Therefore the Company categorizes
its business into three reportable segments, namely (i) Ni-MH Batteries; (ii) Lithium Batteries; and (iii) New Material.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| 2. | Summary of significant accounting policies (continued) |
Fair value of financial instruments
The carrying values of the Company’s
financial instruments, including cash and cash equivalents, restricted cash, trade and other receivables, deposits, trade and other
payables and bank borrowings, approximate their fair values due to the short-term maturity of such instruments.
The Company defines fair value
as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted
to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it
considers assumptions that market participants would use when pricing the asset or liability.
The Company establishes a fair
value hierarchy that requires maximizing the use of observable inputs and minimizing the use of unobservable inputs when measuring
fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input
that is significant to the fair value measurement.
The Company measures fair value
using three levels of inputs that may be used to measure fair value:
-Level 1 applies to assets or
liabilities for which there are quoted prices in active markets for identical assets or liabilities.
-Level 2 applies to assets or
liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in
markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated by, observable market data.
-Level 3 applies to assets or
liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the
fair value of the assets or liabilities.
Warrant Liabilities
For warrants that are not indexed
to the Company’s stock, the Company records the fair value of the issued warrants as a liability at each balance sheet date
and records changes in the estimated fair value as a non-cash gain or loss in the consolidated statement of operations and comprehensive
income. The fair values of these warrants have been determined using the Black-Scholes pricing model. The Black-Scholes pricing
model provides for assumptions regarding volatility, call and put features and risk-free interest rates within the total period
to maturity. These values are subject to a significant degree of judgment on the part of the Company.
Derivatives
From time to time the Company
may utilize foreign currency forward contracts to reduce the impact of foreign currency exchange rate risk. Management considered
that the foreign currency forwards did not meet the criteria for designated hedging instruments and hedged transactions to qualify
for cash flow hedge or fair value hedge accounting. The currency forwards therefore are accounted for as derivatives, with fair
value changes reported as gain (loss) of derivative instruments in the income statement.
Earnings per share
Basic earnings per share (“EPS”)
are computed by dividing income attributable to holders of common shares by the weighted average number of common shares outstanding
during the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common
shares were exercised or converted into common shares. Potential dilutive securities are excluded from the calculation of diluted
EPS in loss periods as their effect would be anti-dilutive.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| 2. | Summary of significant accounting policies (continued) |
Recently issued accounting
pronouncements
As of March 30, 2015, the
Financial Accounting Standards Board (“FASB”) has issued ASU No. 2014-01 through ASU No. 2015-02, which are not
expected to have a material impact on the consolidated financial statements upon adoption.
As of December
31, 2014 and December 31, 2013, restricted cash consisted of the following:
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Securities for bank acceptance bill | |
| 10,689,297 | | |
| 14,132,921 | |
Time deposits | |
| 4,707,530 | | |
| 14,453,200 | |
| |
| 15,396,827 | | |
| 28,586,121 | |
During the year ended December
31, 2014, the Company repaid a series of short-term borrowings which resulted in a decrease in time deposits as of December 31,
2014.
| 4. | Accounts receivable, net |
As of December
31, 2014 and December 31, 2013, accounts receivable consisted of the following:
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Accounts receivable | |
| 34,816,914 | | |
| 36,467,233 | |
Less: allowance for doubtful debts | |
| 2,500,307 | | |
| 2,506,219 | |
| |
| 32,316,607 | | |
| 33,961,014 | |
The Company recorded bad debt
expense of $768and $483,586, respectively, during the years ended December 31, 2014 and 2013, The Company wrote off accounts receivable
of $2,950 and $19,384, respectively, in the years ended December 31, 2014 and 2013.
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Purchase deposits paid | |
| 1,793,599 | | |
| 2,876,267 | |
Value-added tax prepayment | |
| 384,008 | | |
| 1,032,619 | |
Deferred share-based compensation | |
| - | | |
| 131,812 | |
Rental deposit | |
| 266,556 | | |
| 209,095 | |
Deferred insurance fee | |
| 97,005 | | |
| 53,297 | |
Advances to staff for operations | |
| 122,452 | | |
| 48,499 | |
Other deposits and prepayments | |
| 619,900 | | |
| 618,154 | |
| |
| 3,283,520 | | |
| 4,969,743 | |
Other deposits and
prepayments represent deferred expenses and prepayments to services providers.
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Deposit for land use right | |
| 516,418 | | |
| 518,603 | |
Others | |
| 149,410 | | |
| 545,053 | |
| |
| 665,828 | | |
| 1,063,656 | |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Raw materials | |
| 4,341,675 | | |
| 4,281,232 | |
Work in progress | |
| 3,949,778 | | |
| 2,047,627 | |
Finished goods | |
| 13,685,166 | | |
| 13,087,995 | |
Packing materials | |
| 20,137 | | |
| 20,591 | |
Consumables | |
| 271,313 | | |
| 301,915 | |
| |
| 22,268,069 | | |
| 19,739,360 | |
Where there is evidence that
the utility of inventories, in their disposal in the ordinary course of business, will be less than cost, whether due to physical
deterioration, obsolescence, changes in price levels, or other causes, the inventories are written down to fair value. $777,638
and $418,612 was written down for inventories in the years ended December 31, 2014 and 2013, respectively.
| 8. | Property, plant and equipment |
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Cost | |
| | | |
| | |
Construction in progress | |
| 715,821 | | |
| 6,681,652 | |
Furniture, fixtures and office equipment | |
| 3,754,990 | | |
| 3,282,818 | |
Leasehold improvement | |
| 3,763,290 | | |
| 940,089 | |
Machinery and equipment | |
| 28,180,306 | | |
| 24,600,773 | |
Motor vehicles | |
| 1,479,921 | | |
| 1,430,611 | |
Building | |
| 25,414,914 | | |
| 21,521,416 | |
| |
| 63,309,242 | | |
| 58,457,359 | |
Less: accumulated depreciation | |
| 12,871,524 | | |
| 9,909,156 | |
| |
| 50,437,718 | | |
| 48,548,203 | |
The Company recorded depreciation
expenses of $4,054,403 and $2,377,118 for the years ended December 31, 2014 and 2013, respectively.
During the years ended December
31, 2014 and 2013, the Company deducted deferred income related to government grants of $672,675 and $nil, respectively, in calculating
the carrying amount of property, plant and equipment.
The buildings comprising the
Huizhou facilities were pledged as collateral for bank loans as of December 31, 2014. The carrying amount of the building was $10,573,369
and $10,867,411 as of December 31, 2014 and December 31, 2013, respectively.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Cost | |
| | | |
| | |
Land located in Huizhou | |
| 3,505,921 | | |
| 3,520,752 | |
Land located in Ganzhou | |
| 1,367,729 | | |
| 1,373,515 | |
| |
| 4,873,650 | | |
| 4,894,267 | |
Accumulated amortization | |
| (568,333 | ) | |
| (472,852 | ) |
Net | |
| 4,305,317 | | |
| 4,421,415 | |
As of December 31, 2014, land
use rights of the Company included certain parcels of land located in Huizhou City, Guangdong Province, PRC and Ganzhou City, Jiangxi
Province, PRC. Land use rights for land in Huizhou City with an area of approximately 126,605 square meters and in Ganzhou City
with an area of approximately 58,669 square meters will expire on May 23, 2057 and January 4, 2062, respectively.
Land use rights are being amortized
annually using the straight-line method over a contract term of 50 years. Estimated amortization for the coming years is as follows:
2015 | |
| 97,130 | |
2016 | |
| 97,130 | |
2017 | |
| 97,130 | |
2018 | |
| 97,130 | |
2019 and thereafter | |
| 3,916,797 | |
| |
| 4,305,317 | |
The Company recorded amortization
expenses of $97,130 and $96,465 for the years ended December 31, 2014 and 2013, respectively.
The land use right for land
located in Huizhou City was pledged as collateral for bank loans as of December 31, 2014 and December 31, 2013.
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Cost | |
| | | |
| | |
Consumer battery license fee | |
| 1,000,000 | | |
| 1,000,000 | |
| |
| | | |
| | |
Accumulated amortization | |
| (400,000 | ) | |
| (350,000 | ) |
Net | |
| 600,000 | | |
| 650,000 | |
The Company
is amortizing the $1,000,000 cost of the Consumer Battery License Agreement with Ovonic over a period of 20 years on the straight
line basis over the estimated useful life of the underlying technology, which is based on the Company’s assessment of existing
battery technology, current trends in the battery business, potential developments and improvements, and the Company’s current
business plan.
As of December 31, 2014, the
Company had an exclusive proprietary technology with historical cost of zero but still in use. The exclusive proprietary technology
was contributed by four founding management members of GZ Highpower in exchange for the paid-in capital of GZ Highpower. The historical
cost basis was recorded at $nil at the four management members’ historical cost basis.
Amortization
expenses included in selling and distribution costs for the years ended December 31, 2014 and 2013 were $50,000, and $50,000, respectively.
| 11. | Other payables and accrued liabilities |
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Accrued expenses | |
| 3,649,806 | | |
| 3,877,095 | |
Royalty payable | |
| 580,032 | | |
| 582,486 | |
VAT payable | |
| 405,859 | | |
| 1,406,086 | |
Sales deposits received | |
| 911,947 | | |
| 1,574,258 | |
Other payables | |
| 348,903 | | |
| 361,506 | |
| |
| 5,896,547 | | |
| 7,801,431 | |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
The Company and its
subsidiaries file tax returns separately.
1) VAT
Pursuant to the Provisional
Regulation of the PRC on VAT and the related implementing rules, all entities and individuals ("taxpayers") that are
engaged in the sale of products in the PRC are generally required to pay VAT at a rate of 17% of the gross sales proceeds received,
less any deductible VAT already paid or borne by the taxpayers. Further, when exporting goods, the exporter is entitled to a portion
of or all the refund of VAT that it has already paid or incurred. The Company’s PRC subsidiaries are subject to VAT at 17%
of their revenues.
2) Income tax
United States
Highpower was incorporated in
Delaware and is subject to U.S. federal income tax with a system of graduated tax rates ranging from 15% to 35%. As Highpower does
not conduct any business in the U.S. or Delaware, it is not subject to U.S. or Delaware state corporate income tax. No deferred
U.S. taxes are recorded since all accumulated profits in the PRC will be permanently reinvested in the PRC.
Hong Kong
HKHTC, which was incorporated
in Hong Kong, is subject to a corporate income tax rate of 16.5%.
PRC
In accordance with the relevant
tax laws and regulations of the PRC, a company registered in the PRC is subject to income taxes within the PRC at the applicable
tax rate on taxable income.
In China, the companies granted
with National High-tech Enterprise (“NHTE”) status enjoy 15% income tax rate. This status needs to be renewed every
three years. In 2008, SZ Highpower received NHTE status, which was renewed in 2011 and recently renewed in 2014. In 2013, SZ Springpower
received NHTE status. In 2014, both GZ Highpower and ICON received NHTE status. If these subsidiaries fail to renew NHTE status,
they will be subject to income tax at a rate of 25% after the expiration of NHTE status.
All the other PRC subsidiaries
are not entitled to any tax holiday and were subject to income tax at a rate of 25% for calendar years 2014 and 2013.
The components of the
provision for income taxes expenses are:
| |
For the year ended December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Current | |
| 1,435,386 | | |
| 741,426 | |
Deferred | |
| (845,068 | ) | |
| (23,410 | ) |
Total | |
| 590,318 | | |
| 718,016 | |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
The reconciliation of income
taxes expenses computed at the statutory tax rate applicable to the Company to income tax expenses is as follows:
| |
For the year ended December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Income before tax | |
| 3,191,185 | | |
| 2,056,805 | |
| |
| | | |
| | |
Provision for income taxes at applicable income tax rate | |
| 587,347 | | |
| 484,314 | |
Effect of preferential tax rate | |
| (607,461 | ) | |
| (369,502 | ) |
R&D expenses eligible for super deduction | |
| (98,605 | ) | |
| - | |
Non-deductible expenses | |
| 58,643 | | |
| 87,945 | |
Change in valuation allowance | |
| 650,394 | | |
| 515,259 | |
Effective enterprise income tax | |
| 590,318 | | |
| 718,016 | |
3) Deferred tax assets
Deferred tax assets and deferred
tax liabilities reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purpose and the tax bases used for income tax purpose. The following represents the tax effect of each major type of
temporary difference.
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
| |
| | |
| |
Tax loss carry-forward | |
| 3,798,290 | | |
| 2,601,823 | |
Allowance for doubtful receivables | |
| 111,637 | | |
| 112,446 | |
Allowance for inventory obsolescence | |
| 138,458 | | |
| 46,441 | |
Fair value change of currency forwards | |
| - | | |
| (9,493 | ) |
Difference for sales cut-off | |
| 20,572 | | |
| 46,824 | |
Deferred income | |
| 283,111 | | |
| 168,880 | |
Property, plant and equipment subsidized by government grant | |
| 100,901 | | |
| - | |
Total gross deferred tax assets | |
| 4,452,969 | | |
| 2,966,921 | |
Valuation allowance | |
| (2,805,785 | ) | |
| (2,164,696 | ) |
Total net deferred tax assets | |
| 1,647,184 | | |
| 802,225 | |
Notes payable are presented
to certain suppliers as a payment against the outstanding trade payables.
Notes payable are mainly bank
guarantee promissory notes which are non-interest bearing and generally mature within six months. The outstanding bank guarantee
promissory notes are secured by restricted cash deposited in banks. Outstanding bank guarantee promissory notes payable were $29,380,782
and $25,271,256 as of December 31, 2014and 2013, respectively.
As of December 31, 2014, the
Company issued $522,466 trade acceptances to suppliers. These trade acceptance are non-interest bearing and mature within six months.
No security deposit is needed. The trade acceptance as of December 31, 2013 was nil.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Short- term bank loans guaranteed and repayable within one year | |
| 15,195,040 | | |
| 36,142,105 | |
As of December 31, 2014, the above
bank borrowings were for working capital and capital expenditure purposes and were secured by personal guarantees executed by certain
directors of the Company, a land use right with a carrying amount of $3,015,092, the building with a carrying amount of $10,573,369.
The loans as of December 31, 2014
were primarily obtained from four banks with interest rates ranging from 2.9% to 7.5% per annum. The interest expenses were $1,472,013
and $1,128,578 for the years ended December 31, 2014 and 2013, respectively.
The Company entered into various
credit contracts and revolving lines of credit, which were used for short-term loans and bank acceptance bills. The following tables
summarize the unused lines of credit as of December 31, 2014 and December 31, 2013:
| |
December 31, 2014 |
Lender | |
Starting date | |
Maturity date | |
Line of credit | | |
Unused line of credit | |
| |
| |
| |
$ | | |
$ | |
Bank of China | |
3/10/2014 | |
3/10/2015 | |
| 12,653,474 | | |
| 424,823 | |
Bank of China | |
7/23/2014 | |
7/23/2015 | |
| 3,965,144 | | |
| 67,516 | |
Ping An Bank Co., Ltd | |
10/20/2014 | |
10/19/2015 | |
| 11,428,945 | | |
| 295,818 | |
China Minsheng Banking Corp., LTD | |
5/22/2014 | |
5/22/2015 | |
| 3,265,413 | | |
| - | |
Shenzhen Baoan Guiyin County Bank | |
11/19/2014 | |
11/18/2015 | |
| 4,734,848 | | |
| 1,750,151 | |
Industrial and Commercial Bank of China | |
7/26/2012 | |
7/25/2015 | |
| 6,530,826 | | |
| 3,918,496 | |
China Citic Bank | |
6/25/2014 | |
6/25/2015 | |
| 8,046,910 | | |
| 6,788,093 | |
Industrial Bank Co., Ltd | |
10/23/2014 | |
10/23/2015 | |
| 6,530,825 | | |
| 4,430,636 | |
Jiang Su Bank Co., Ltd | |
10/28/2014 | |
9/11/2015 | |
| 4,898,119 | | |
| 4,898,119 | |
Total | |
| |
| |
| 62,054,504 | | |
| 22,573,652 | |
| |
December 31, 2013 |
Lender | |
Starting date | |
Maturity date | |
Line of credit | | |
Unused line of credit | |
| |
| |
| |
$ | | |
$ | |
Industrial and Commercial Bank of China | |
7/26/2012 | |
7/25/2015(ii) | |
| 6,558,452 | | |
| 1,803,574 | |
China Citic Bank | |
3/29/2013 | |
3/29/2014(ii) | |
| 7,378,259 | | |
| 5,738,646 | |
Bank of China | |
1/25/2013 | |
1/25/2014 (i) | |
| 3,689,129 | | |
| 247,582 | |
Bank of China | |
1/10/2013 | |
1/10/2014 (ii) | |
| 12,707,001 | | |
| 1,674,876 | |
China Everbright Bank | |
5/30/2013 | |
5/29/2014(i) | |
| 8,438,433 | | |
| 1,382,194 | |
China Everbright Bank | |
9/4/2013 | |
9/3/2014(i) | |
| 1,147,729 | | |
| - | |
Industrial Bank Co., Ltd | |
7/24/2013 | |
7/24/2014(i) | |
| 8,198,065 | | |
| 6,558,452 | |
Jiang Su Bank Co., Ltd | |
6/21/2013 | |
6/20/2014(i) | |
| 4,918,839 | | |
| - | |
Ping An Bank | |
11/12/2013 | |
9/17/2014(ii) | |
| 11,477,291 | | |
| 7,564,027 | |
Shanghai Commercial & Saving Bank | |
8/29/2013 | |
8/29/2014(i) | |
| 3,000,000 | | |
| 1,250,000 | |
Industrial and Commercial Bank of China(MACAU) LIMITED | |
7/29/2013 | |
1/29/2014(i) | |
| 7,093,296 | | |
| 3,084,294 | |
Total | |
| |
| |
| 74,606,494 | | |
| 29,303,645 | |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
(i) The lines of credit from
these banks are terminated at maturity dates.
(ii) The lines of credit from
these banks are rolled over after maturity dates.
The lines of credits from Industrial
and Commercial Bank of China, China Citic Bank, Ping An Bank, Industrial Bank Co. Ltd, China Minsheng Banking Corp., LTD and Shenzhen
Baoan Guiyin County Bankare guaranteed by the Company’s Chief Executive Officer, Mr. Dang Yu Pan. The lines of credits from
Jiang Su Bank are guaranteed by the Company’s Chief Executive Officer, Mr. Dang Yu Pan, and his wife. The lines of credits
from Bank of China are guaranteed by the Company’s Chief Executive Officer, Mr. Dang Yu Pan and Vice President, Wen Liang
Li.
Certain of the agreements governing
the Company’s loans include standard affirmative and negative covenants, including restrictions on granting additional pledges
on the Company’s property and incurring additional debt and obligations to provide advance notice of major corporate actions,
and other covenants including: that the borrower may not serve as a guarantor for more than double its net assets; that the borrower
is restricted in certain circumstances from using the loans in connection with related party transactions or other transactions
with affiliates; that the borrower must provide monthly reports to certain lenders describing the actual use of loans; that the
borrower may need to obtain approval to engage in major corporate transactions; and that the borrower may need to obtain approval
to increase overseas investments, guarantee additional debt or incur additional debt by an amount which exceeds 20% of its total
net assets should the lender determine that such action would have a material impact on the ability of the borrower to repay the
loan. The covenants in these loan agreements could prohibit the Company from incurring any additional debt without consent from
its lenders. The Company believes it would be able to obtain consents from the lenders in the event it needed to do so. The agreements
governing the Company’s loans may also include covenants that, in certain circumstances, may require the Company’s
PRC operating subsidiaries to give notice to, or obtain consent from, certain of their lenders prior to making a distribution of
net profit, as well as covenants restricting the ability of the Company’s PRC operating subsidiaries from extending loans.
As of December 31, 2014 and December 31, 2013, the Company was in compliance with all material covenants in its loan agreements.
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Long term loans from Bank of China | |
| 3,918,495 | | |
| 5,902,607 | |
Less: current portion of long-term borrowings | |
| 1,959,248 | | |
| 1,967,536 | |
Long-term borrowings, net of current portion | |
| 1,959,247 | | |
| 3,935,071 | |
On January 13, 2012, the Company
borrowed $8,198,065 (RMB50 million) from Bank of China, which is guaranteed by the Company’s Chief Executive Officer, Mr.
Dang Yu Pan. It is five-year long-term loan, with an annual interest rate of 7.04%, which was equal to 110% of the benchmark-lending
rate of the People’s Bank of China (“PBOC”) as of December 31, 2014. Interest expenses are to be paid quarterly.
The interest expenses were $366,142
and $518,577 for the years ended December 31, 2014 and 2013, respectively.
The principal is to be repaid
quarterly from September 30, 2012. 2% of the principal was repaid on September 30, 2012 and December 30, 2012, respectively. Thereafter
6% of the principal is to be repaid every quarter after December 31, 2012 until the maturity date. The repayment schedule of the
principal is summarized as in below table:
| |
$ | |
2015 | |
| 1,959,248 | |
2016 | |
| 1,959,247 | |
| |
| 3,918,495 | |
HIGHPOWER INTERNATIONAL, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| 17. | Share-based compensation |
2008 Omnibus
Incentive Plan
The 2008
Omnibus Incentive Plan (the "2008 Plan") was approved by the Company’s Board of Directors on October 29, 2008 to
be effective as such date, subject to approval of the Company’s stockholders which occurred on December 11, 2008. The 2008
Plan has a ten year term. The 2008 Plan reserves two million shares of common stock for issuance, subject to adjustment in the
event of a recapitalization in accordance with the terms of the 2008 Plan.
The 2008
Plan authorizes the issuance of awards including stock options, restricted stock units (RSUs), restricted stock, unrestricted stock,
stock appreciation rights (SARs) and other equity and/or cash performance incentive awards to employees, directors, and consultants
of the Company. Subject to certain restrictions, the Compensation Committee of the Board of Directors has broad discretion to establish
the terms and conditions for awards under the 2008 Plan, including the number of shares, vesting conditions and the required service
or performance criteria. Options and SARs may have a contractual term of up to ten years and generally vest over three to five
years with an exercise price equal to the fair market value on the date of grant. Incentive stock options (ISOs) granted must have
an exercise price equal to or greater than the fair market value of the Company’s common stock on the date of grant. Repricing
of stock options and SARs is permitted without stockholder approval. If a particular award agreement so provides, certain change
in control transactions may cause such awards granted under the 2008 Plan to vest at an accelerated rate, unless the awards are
continued or substituted for in connection with the transaction. As of December 31, 2014, approximately 626,714 shares of common
stock remained available for issuance pursuant to awards granted under the 2008 Plan.
Options
Granted to Employees
| |
Number of Shares | | |
Weighted Average Exercise Price | | |
Remaining Contractual Term in Years | |
| |
| | |
$ | | |
| |
Outstanding, January 1, 2013 | |
| 665,000 | | |
| 2.81 | | |
| 8.35 | |
| |
| | | |
| | | |
| | |
Granted | |
| 540,000 | | |
| 2.63 | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | |
Forfeited | |
| (100,000 | ) | |
| 1.15 | | |
| - | |
Canceled | |
| - | | |
| - | | |
| - | |
Outstanding, December 31, 2013 | |
| 1,105,000 | | |
| 2.87 | | |
| 8.51 | |
Exercisable, December 31, 2013 | |
| 380,000 | | |
| 3.14 | | |
| 7.19 | |
Vested and expected to vest, December 31, 2013 | |
| 940,022 | | |
| 2.90 | | |
| 8.33 | |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated
in US Dollars)
| 17. | Share-based compensation (continued) |
Options
Granted to Employees (continued)
| |
Number of Shares | | |
Weighted Average Exercise Price | | |
Remaining Contractual Term in Years | |
| |
| | |
$ | | |
| |
Outstanding, January 1, 2014 | |
| 1,105,000 | | |
| 2.87 | | |
| 8.51 | |
| |
| | | |
| | | |
| | |
Granted | |
| - | | |
| - | | |
| - | |
Exercised | |
| (200,000 | ) | |
| 2.41 | | |
| - | |
Forfeited | |
| (44,714 | ) | |
| 2.63 | | |
| - | |
Canceled | |
| (100,000 | ) | |
| 3.55 | | |
| - | |
Outstanding, December 31, 2014 | |
| 760,286 | | |
| 2.92 | | |
| 7.78 | |
Exercisable, December 31, 2014 | |
| 413,620 | | |
| 3.16 | | |
| 6.98 | |
Vested and expected to vest, December 31, 2014 | |
| 702,788 | | |
| 2.94 | | |
| 7.71 | |
The aggregate
intrinsic value of options vested and expected to vest as of December 31, 2014 and December 31, 2013 was approximately $1.43 million
and $nil, respectively. Intrinsic value is calculated as the amount by which the current market value of a share of common stock
exceeds the exercise price multiplied by the number of option shares.
During
the year ended December 31, 2014, the Company did not grant any new options to employees. One employee exercised his options to
purchase 200,000 shares of the Company’s common stock. As a result, the Company issued 106,640 shares of common stock to
this employee by net share settlement. Two employees had resigned and their options to purchase a total of 44,714 shares of the
Company’s common stock were forfeited. One employee had resigned with 100,000 vested shares outstanding, which were cancelled
90 days after termination.
During
the year ended December 31, 2013, the Company granted options to purchase 540,000 shares of common stock to 70 employees at a weighted
average exercise price of $2.63 per share. One employee had resigned and options to purchase a total of 100,000shares had been
forfeited in accordance with the terms and conditions of the 2008 Plan.
The estimated
fair value of share-based compensation to employees is recognized as a charge against income on a ratable basis over the requisite
service period, which is generally the vesting period of the award.
Restricted
Stock Awards Granted to Employees
During
the year ended December 31, 2013 the Company granted 246,000 shares of restricted stock to members of the Board of Directors as
Restricted Stock Awards (“RSA”) under 2008 Plan. The RSAs granted in 2013 had the following vesting periods; 30% immediately
upon grant, 30% vest on first anniversary of the grant date, and 40% vest on the second anniversary of grant date. The RSAs are
governed by agreements between the Company and recipients of the awards. Terms of the agreements are determined by the Compensation
Committee. There were no RSAs granted to employees during the year ended December 31, 2014.
The following
table summarizes the restricted stock awards activities for the year ended December 31, 2014:
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| |
Number of Shares | | |
Weighted Average Exercise Price | | |
Remaining Contractual Term in Years | |
| |
| | |
$ | | |
| |
Outstanding, January 1, 2014 | |
| 172,200 | | |
| 2.81 | | |
| 1.77 | |
| |
| | | |
| | | |
| | |
Granted | |
| - | | |
| - | | |
| - | |
Released | |
| 73,800 | | |
| 2.81 | | |
| - | |
Forfeited | |
| - | | |
| - | | |
| - | |
Outstanding, December 31, 2014 | |
| 98,400 | | |
| 2.81 | | |
| 0.77 | |
Expected to vest, December 31, 2014 | |
| 87,576 | | |
| 2.81 | | |
| 0.77 | |
Share-based
Compensation to Nonemployees
On July
15, 2013, the Company entered into an agreement with a consulting firm. In return for the consulting firm’s financial advisory
service in the coming two years, the Company issued an aggregate of 150,000 shares of the Company’s common stock to the consulting
firm on August 15, 2013. The shares were fully vested upon issuance and the fair value of the shares was $171,000 which was based
on the closing market price of the Company’s common stock on August 15, 2013. The share-based compensation was being amortized
over the consulting service period. In the second quarter of 2014, the service agreement was terminated. Therefore, the remaining
unamortized balance, approximately $131,812, was recognized as share-based compensation expense during the year ended December
31, 2014.
The Company
also agreed to issue another 150,000 shares of the Company’s common stock to the consulting firm after a specific financing
target is completed. As the financing target was not achieved before the termination of the service agreement in the second quarter
of 2014, such 150,000 shares of common stock was not issued to the consulting firm.
Also, in
connection with this consulting agreement, on January 17, 2014 the Company issued five year warrants to purchase 200,000 shares
of the Company’s common stock. The shares were fully vested upon issuance and the aggregate fair value of the warrants was
approximately $390,000, which was calculated using the Black-Scholes pricing model, with the following weighted-average assumptions:
| |
For the years ended December 31, | |
| |
2014 | | |
2013 | |
Expected volatility | |
| 83.6 | % | |
| NA | |
Risk-free interest rate | |
| 1.64 | % | |
| NA | |
Expected term from grant date (in years) | |
| 5.0 | | |
| NA | |
Dividend rate | |
| - | | |
| NA | |
Fair value | |
$ | 1.95 | | |
| NA | |
Expected
Term
The expected term of the warrants
issued during the year ended December 31, 2014, represents the remaining contractual term of the warrants.
Expected
Volatility
The expected volatility used
for the year ended December 31, 2014 is based upon the Company’s own trading history.
Risk-Free
Interest Rate
The risk-free interest rate assumption
is based on U.S. Treasury instruments with a term consistent with the contractual term of the warrants issued during the first
quarter of 2014.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
Dividend
Yield
The Company has never declared
or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future, and therefore, used an expected dividend
yield of zero in the valuation model.
Forfeitures
The Company estimates forfeitures
at the time of grant and revises the estimates in subsequent periods if actual forfeitures differ from what was estimated. The
forfeiture rate is applied to stock options and restricted stock awards. The Company uses historical data to estimate pre-vesting
forfeitures and records stock-based compensation expense only for those awards that are expected to vest. All stock-based payment
awards are amortized on a ratable basis over the requisite service periods of the awards, which are generally the vesting periods.
The Company records stock-based compensation expense only for those awards that are expected to vest.
The fair value of the consulting
agreement warrants was being amortized over the consulting service period. In the second quarter of 2014, the service agreement
was terminated. Therefore, the entire share-based compensation expense of approximately $390,000 was recognized during the twelve
months ended December 31, 2014.
Total
Share-based Compensation Expenses
As of December 31, 2014 the
gross amount of unrecognized share-based compensation expense relating to unvested share-based awards held by employees was approximately
$813,000, which the Company anticipates recognizing as a charge against income over a weighted average period of 1.47 years.
In connection with the grant
of stock options, restricted stock awards and warrants to employees and nonemployees, the Company recorded stock-based compensation
charges of $767,317 and $521,599, respectively, for the year ended December 31, 2014 and stock-based compensation charges of $387,089
and $39,690, respectively, for the year ended December 31, 2013.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
Basic earnings per common share
are computed by dividing income available to common stockholders by the weighted-averages number of shares of common stock outstanding
during the period. Diluted earnings per common share is computed by dividing income available to common stockholders by the weighted-average
number of shares of common stock outstanding during the period increased to include the number of additional shares of common
stock outstanding that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive
securities include outstanding stock options, restricted shares. The dilutive effect of potential dilutive securities is reflected
in diluted earnings per common share by application of the treasury stock method. Under the treasury stock method, an increase
in the fair market value of the Company’s common stock can result in a greater dilutive effect from potentially dilutive
securities. The Company excludes potential common stocks in the diluted EPS computation in periods of losses from continuing operations,
as their effect would be anti-dilutive.
The following
table sets forth the computation of basic and diluted earnings per common share for the years ended December 31, 2014 and 2013.
| |
Year ended December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Numerator: | |
| | | |
| | |
Net income attributable to the Company | |
| 2,753,236 | | |
| 1,451,218 | |
| |
| | | |
| | |
Denominator: | |
| | | |
| | |
Weighted-average shares outstanding | |
| | | |
| | |
- Basic | |
| 14,739,073 | | |
| 13,671,169 | |
-diluted | |
| 15,154,239 | | |
| 13,687,698 | |
| |
| | | |
| | |
Earnings per common share | |
| | | |
| | |
- Basic | |
| 0.19 | | |
| 0.11 | |
- diluted | |
| 0.18 | | |
| 0.11 | |
Diluted
earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common
stock were exercised and converted into common stock.
760,286 shares
of outstanding stock options, 144,714 shares of forfeited or expired stock options and 200,000 shares of warrants with
a total dilutive effect of 415,166 shares were included in the computation of diluted EPS for the year ended December 31,
2014. There were 540,001 options and warrants outstanding as of December 31, 2014, which were not included in the computation
of diluted EPS for the year ended December 31, 2014 because of their excise price would be above average market value.
200,000
stock options with a dilutive effect of 16,529 shares were included in the computation of diluted EPS for the year ended December
31, 2013.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| 19. | Securities Offering Transaction |
In April 2014, the Company and
certain institutional investors entered into a securities purchase agreement, pursuant to which the Company sold 1,000,000 shares
of common stock and warrants exercisable for 500,000 shares of common stock in a registered direct offering at a price of $5.05
per fixed combination for aggregate proceeds of $5.05 million. The shares and warrants were sold in multiples of a fixed combination
consisting of (i) one share of common stock and (ii) one immediately exercisable warrant to purchase 0.50 shares of common stock.
The net proceeds from the offering was $4,633,164, after deducting fees due the placement agent and offering expenses.
The warrants have an initial
exercise price of $6.33 per share and are exercisable until April 17, 2017. The exercise price of the warrants, and in some cases
the number of shares issuable upon exercise of the warrants, will be subject to appropriate adjustment in relation to certain events.
In addition, if the Company issues shares in the future at a price below $6.33 per share, the exercise price of the warrants will
be reduced to such lower price. No adjustment will be made to the number of shares purchasable in such event.
The warrants were classified
as a liability. The aggregate fair value of the warrant liability at issuance dates was $1,173,952. The residual balance of $3,459,212
was allocated to common shares issued.
The fair values of the warrants
as of April 17, 2014 were calculated using the Black-Scholes pricing model with the following assumptions:
| |
April 17, 2014 | |
| |
2014 | | |
2013 | |
Expected volatility | |
| 85.76 | % | |
| NA | |
Risk-free interest rate | |
| 0.9 | % | |
| NA | |
Expected term (in years) | |
| 3.0 | | |
| NA | |
Dividend rate | |
| - | | |
| NA | |
Fair value | |
$ | 2.3 | | |
| NA | |
The fair value of the investor warrant liability will
be re-measured at each period and recorded as a gain or loss on fair value of warrant liability. As of December 31, 2014, the fair
value of warrant liability was $1,067,674 and the Company recognized a gain of $106,278 on the change of fair value of warrant
liability.
The fair values of the warrants as of December 31,
2014 were calculated using the Black-Scholes pricing model with the following assumptions:
| |
Year ended December 31, | |
| |
2014 | | |
2013 | |
Expected volatility | |
| 86.4 | % | |
| NA | |
Risk-free interest rate | |
| 0.79 | % | |
| NA | |
Expected term (in years) | |
| 2.29 | | |
| NA | |
Dividend rate | |
| - | | |
| NA | |
Fair value | |
$ | 2.14 | | |
| NA | |
In conjunction with the securities offering transaction,
the Company issued three year warrants to investment bankers to purchase 40,000 shares of the Company’s common stock at $6.33
per share. The aggregate fair value of the warrants was $94,982, which was recognized as a share-based compensation and resulted
in an increase of additional paid-in capital. As such compensation was offering cost, it resulted in a reduction in additional
paid-in capital. Hence, such transaction has no net impact on the Company’s financial position as of December 31, 2014.
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
| 20. | Defined contribution plan |
Full-time
employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension
benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require
that the PRC operating subsidiaries of the Company make contributions to the government for these benefits based on certain percentages
of the employees’ salaries. Except for pension benefits, medical care, employee housing fund and other welfare benefits mentioned
above, the Company has no legal obligation for the benefits beyond the contributions made.
The total
amounts for such employee benefits, which were expensed as incurred, were $1,489,130 and $1,613,765 for the years ended December
31, 2014 and 2013, respectively.
| 21. | Non-controlling interest |
GZ Highpower
is the Company’s majority-owned subsidiary which is consolidated in the Company’s financial statements with a non-controlling
interest recognized. GZ Highpower is engaged in processing, marketing and research of battery materials.
On May
15, 2013, GZ Highpower increased its paid-in capital from RMB15,000,000 ($2,381,293) to RMB30,000,000 ($4,807,847).SZ Highpower
holds 60% of the equity interest of GZ Highpower, and four founding management members of GZ Highpower hold the remaining 40%.On
November 13, 2014, GZ Highpower increased its paid-in capital from RMB30,000,000 ($4,898,119) to RMB40,000,000 ($6,530,825) and
the additional capital of RMB10,000,000 was contributed by SZ Highpower. As of December 31, 2014, SZ Highpower holds 70% of the
equity interest of GZ Highpower, and four founding management members of GZ Highpower hold the remaining 30%.
As of December
31, 2014 and 2013, non-controlling interest related to GZ Highpower in the consolidated balance sheet was $1,307,239 and $1,299,252,
respectively.
For the
years ended December 31, 2014 and 2013, non-controlling interest related to GZ Highpower in the consolidated statements of operations
was loss of $152,369 and $112,429, respectively.
| 22. | Commitments and contingencies |
Operating
leases commitments
The Company
leases factory and office premises under various non-cancelable operating lease agreements that expire at various dates through
years 2015 to 2017,with an option to renew the lease. All leases are on a fixed repayment basis. None of the leases include contingent
rentals. Minimum future commitments under these agreements as of December 31, 2014 are as follows:
| |
$ | |
2015 | |
| 1,486,667 | |
2016 | |
| 1,344,136 | |
2017 | |
| 335,325 | |
| |
| | |
| |
| 3,166,128 | |
Rent expenses
for the years ended December 31, 2014 and 2013 were$1,589,757 and $1,343,045, respectively.
Capital
commitments
The Company
had contracted capital commitments of $nil for the construction of the Ganzhou plant as of December 31, 2014 and $990,031 for the
construction of the Huizhou plant as of December 31, 2013.
HIGHPOWER INTERNATIONAL, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
The reportable
segments are components of the Company that offer different products and are separately managed, with separate financial information
available that is separately evaluated regularly by the Company’s chief operating decision maker (“CODM”), the
Chief Executive Officer, in determining the performance of the business. The Company categorizes its business into three reportable
segments, namely (i) Ni-MH Batteries; (ii) Lithium Batteries; and (iii) New Materials.
The CODM
evaluates performance based on each reporting segment’s net sales, cost of sales, gross profit and total assets. Net sales,
cost of sales, gross profit and total assets by segments is set out as follows:
| |
For the years ended December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Net sales | |
| | | |
| | |
Ni-MH Batteries | |
| 74,971,144 | | |
| 72,886,102 | |
Lithium Batteries | |
| 68,434,832 | | |
| 57,935,104 | |
New Materials | |
| 3,682,190 | | |
| 2,028,616 | |
Total | |
| 147,088,166 | | |
| 132,849,822 | |
| |
| | | |
| | |
Cost of Sales | |
| | | |
| | |
Ni-MH Batteries | |
| 59,546,738 | | |
| 59,131,594 | |
Lithium Batteries | |
| 54,072,611 | | |
| 45,515,519 | |
New Materials | |
| 3,318,014 | | |
| 1,818,667 | |
Total | |
| 116,937,363 | | |
| 106,465,780 | |
| |
| | | |
| | |
| |
| | | |
| | |
Gross Profit | |
| | | |
| | |
Ni-MH Batteries | |
| 15,424,406 | | |
| 13,754,508 | |
Lithium Batteries | |
| 14,362,221 | | |
| 12,419,585 | |
New Materials | |
| 364,176 | | |
| 209,949 | |
Total | |
| 30,150,803 | | |
| 26,384,042 | |
| |
December 31,2014 | | |
December 31,2013 | |
| |
$ | | |
$ | |
Total Assets | |
| | | |
| | |
Ni-MH Batteries | |
| 50,275,286 | | |
| 66,960,366 | |
Lithium Batteries | |
| 86,339,973 | | |
| 76,357,912 | |
New Materials | |
| 9,538,813 | | |
| 8,475,098 | |
Total | |
| 146,154,072 | | |
| 151,793,376 | |
All long-lived
assets of the Company are located in the PRC. Geographic information about the sales and accounts receivable based on the location
of the Company’s customers is set out as follows:
| |
For the years ended December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Net sales | |
| | | |
| | |
China mainland | |
| 69,271,339 | | |
| 64,941,519 | |
Asia, others | |
| 37,699,071 | | |
| 28,684,864 | |
Europe | |
| 29,853,397 | | |
| 28,606,470 | |
North America | |
| 9,335,245 | | |
| 9,572,209 | |
South America | |
| 426,664 | | |
| 490,728 | |
Africa | |
| 289,104 | | |
| 362,449 | |
Others | |
| 213,346 | | |
| 191,583 | |
| |
| | | |
| | |
| |
| 147,088,166 | | |
| 132,849,822 | |
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
$ | | |
$ | |
Accounts receivable | |
| | | |
| | |
China mainland | |
| 17,282,481 | | |
| 20,355,864 | |
Asia, others | |
| 8,662,503 | | |
| 7,476,754 | |
Europe | |
| 5,747,058 | | |
| 5,191,444 | |
North America | |
| 296,572 | | |
| 863,156 | |
South America | |
| 211,391 | | |
| 50,691 | |
Africa | |
| 81,962 | | |
| 25 | |
Others | |
| 34,640 | | |
| 23,080 | |
| |
| | | |
| | |
| |
| 32,316,607 | | |
| 33,961,014 | |
Exhibit 10.2
Basic Credit Line Contract
Reference: Xing Yin Shen Longgang credit zi
(2014) No. 0504
Creditor: Industrial Bank Co., Ltd., Shenzhen
Longgang Branch
Address: Parkland, Longxiang Road, Longgang
town, Shenzhen
Legal Representative / CEO: Jinkui Li
Contact: Jinlong Huang
Address:
Postal Code: |
Fax : |
|
|
Tel: 0755-33837817 |
Fax: |
Debtor: Springpower Technology (Shenzhen) Co.,
Ltd.
Address: Building
A, Chaoshun Industrial Zone, Renmin Street, Danhu, Guanlan Road, Baoan, Shenzhen
Legal Representative / CEO: Dangyu Pan
Contact:
Address:
Postal Code: |
Fax : |
|
|
Tel: 0755-89686236 |
Fax: |
Contract Location: Industrial Bank Building,
Industrial Bank Co., Ltd. Shenzhen Branch
Important Prompt
For protecting your rights and interests, please
read, check and confirm the following items carefully before signing:
1. You have the right to sign this contract
or you have been given sufficient authority legally.
2. You have read and understood this contract
carefully and sufficiently, and have paid attention on assuming, exempting or limiting responsibilities of Industrial Bank Co.,
Ltd., and the content with bold font.
3. Your company and you understand the meaning
of this contract and the relevant legal consequences, and agree to accept these provisions.
4. The contract provided by Industrial Bank
Co., Ltd. is a model contract. There is space for modifying, supplementing and deleting.
5. If you have further questions on this contract,
please consult Industrial Bank Co., Ltd.
After application, creditor agrees to provide
a basic credit line to debtor. To clarify the rights and obligations of both parties, and abide by credit, the contracting parties
sign this contract agreed together according to relevant state laws and regulations.
Clause 1 Definitions and interpretation
Except agreed in writing by the contracting
parties, the following words in this contract will be explained as follows:
1. Basic credit line: based on comprehensive
evaluation of management and risk of debtor, creditor will decide the maximum amount of comprehensive financing principal of debtor,
including but not limited local foreign currency, various trade financing (issuing letter of credit, trust receipt, packing loan,
export bill purchase, export bill purchase under collection and advanced against inward documentary bills, etc.) bank acceptance
bill, notes discounted, notes repo, guarantee (including independent guarantee, demand guarantee, standby letter of credit, etc.)
and so on.
2. Valid period of credit line is one uninterrupted
period, during which the debtor can conduct business transactions stipulated under the basic credit line, with creditor’s
consent. The basic credit line expires when the valid period of credit ends.
3. Balance: creditor will manage and control the
balance of various businesses of debtor. The balance is the sum of used credit line, including undue balance and expired outstanding
balance, as follows:
(1) Undue balance: the sum of undue outstanding
debts which are used by debtor according to this contract.
(2) The due unpaid balance is the debt principal
balance that the Creditor granted the Debtor, or is entitled for to perform certain legal responsibilities, but remained unpaid
at the expiry date.
4. Macro contract: Basic credit line contract,
which is signed by creditor and debtor.
Sub-contract: the specific business contract
signed by two parties voluntarily. This contract is the macro contract of any sub-contracts, any sub-contract is an inalienable
part of this contract, and has the same legal effect.
5. Principal debt: debt principal, interest
and expense resulting from conducting various business transactions under this contract applied by debtor, including but not limited
local foreign currency, various trade financing (such as issuing letter of credit, trust receipt, packing loan, export bill purchase,
export bill purchase under collection and advanced against inward documentary bills, etc.) bank acceptance bill, notes discounted,
notes repo, guarantee (including independent guarantee, demand guarantee, standby letter of credit, etc.) and so on. (Including
principal, interest, punitive interest, compound interest, liquidated damages, damage awards, expenses for realizing financial
claim, etc.)
Expenses for realizing a financial claim: the
money which creditor spends for realizing a financial claim by litigation, arbitration, etc. such as court (arbitration) costs,
attorneys’ fees, traveling fees, execution fees, maintenance costs, and other necessary costs for realizing a financial claim.
6. Important transaction which is mentioned
in clause 8 (including but not limited): anything which might have a bad effect on the basic organization of debtor’s company,
changes of stockholders, contingent liabilities, cash flows, profitability, core business secrets, important assets, significant
claims and debts, repayment ability, other transactions which are considered as
significant transactions by creditor and/or debtor.
7. Important transaction which is mentioned
in clause 8 (including but not limited): anything which may have bad effect on executives’ operational capability, employment
and termination of core staff, core business secrets, core competence, basic organization, legality, stability, development, profitability,
repayment ability, other things which are considered as significant things by creditor and/or debtor.
8. Workday mentioned in this contract refers
to a banking day. If the drawdown date or the repayment date is on a legal holiday, then it is delayed to the first working day
after the holiday.
Clause 2 Credit Line
1. The maximum amount of basic credit line
is RMB (in words) FORTY MILLION YUAN ONLY. If debtor uses foreign currency in specific business, the foreign currency will be converted
to RMB according to the exchange rate announced by creditor on the date when the applicable sub-contract is signed, and will be
included in credit line.
2. Decomposition of credit line
(1) Working capital loan: RMB 20,000,000
(2) Bank acceptance: RMB40,000,000
(3) Export loan under mortgage of
documents: RMB 20,000,000
(4) Standby letter of credit: RMB
40,000,000
3. If the Debtor repays the used line of credit
within valid period of credit line, the equivalent amount of credit line recovers automatically.
4. The financing balance should not be more
than RMB 40,000,000, including all debts used by debtor according to this contract, and the single credit line cannot be more than
RMB 40,000,000.
Clause 3 Valid Period and Adjustment of
Credit Line
1. Valid period of credit line under this contract
is from Oct 23th 2014 to Oct 23th 2015.
2. This contract is not the definite obligation
of creditor, in any circumstance, creditor has the right to adjust or cancel the credit line and valid period under this contract
partly or completely without the consent of debtor. Foregoing “any circumstance” includes but not limited following
situations:
(1) debtor has significant operational difficulties
and risks;
(2) debtor has significant changes in ownership
or contingent debt;
(3) debtor has significant changesin its operational
mechanism (including but not limited discrete, merger, termination, etc.);
(4) debtor gets hit with credit downgrade and
which increasesrisk of repayment;
(5) the situation and conditions of one transaction,
which Debtor works on, have significant changes;
(6) the statements and commitments of debtor
mentioned in clause 7 become invalid;
(7) other creditors think it is necessary to
change, adjustment or canceldebtor’s credit line.
3. If debtor needs to increase temporary the
credit line because of a change of situation or special project, debtor can apply for special credit line from creditor, which
can only be used for special project, and should not be used as cycle.
Clause 4 Repayment and adjustment of advance
in cash and receipt under different credit line
Creditor has the right to use the funds received
under one or more of the lines to repay the advanced money which is used according to this contract, without the consent of debtor
and guarantor.
Clause 5 Guarantee Measures
1. The following contracts are guarantee contracts
of this contract and sub-contracts.
(1)REF: Xing Yin Shen Longgang credit (guarantee)
zi (2014) No. 0504
"Maximum Amount Guaranty Contract"
(the name of the contract), guarantor: Shenzhen Highpower Technology Co Ltd, mode: guarantee;
(2) REF: Xing Yin Shen Longgang credit (guarantee)
zi (2014) No. 0504A "Maximum Amount Guaranty Contract" (the name of the contract), guarantor: Dangyu Pan, mode: guarantee;
2. Before the signing of guarantee contracts
and completing the guarantee procedures, creditor has the right to refuse handling an application for using the credit line under
this contract, and providing the loans under this contract and sub-contracts.
3. The maximum guarantee for all debts under
the credit line should be provided by the above guarantors (guarantor, mortgagor or pledger), except as agreed by creditor, debtor
and guarantor.
4. If following things happen to the guarantor
under this contract, creditor has the right to take measures according to clause 9 of this contract.
(1) Guarantor violates the maximum guarantee
contract; a deterioration of guarantor’s credit position; or other things, which may damage guarantee ability happen;
(2) Mortgager violates the maximum mortgage
contract; damages mortgage intentionally; the value of mortgage might has been reduced obviously; or other things which damage
the hypothecation of creditor;
(3) Pledger violates the maximum pledge contract;
the value of pledge has been reduced obviously; or the right of pledge has to be cashed in advance; or other things which damage
the pledge of creditor.
Clause 6 The Rights and Obligations of Creditor
1. During credit period, if the
accumulated total balance used by debtor is less than the maximum capital limit, creditor will review a loan application
which is within the limit from debtor. The application will be accepted if it meets each of the conditions and requirements
requested by creditor. If Creditor is unable to make a substantive examination because of debtor or any other reasons, it
should not constitute a defense. Debtor and guarantor give up considering it as a defense.
2. Creditor has the right to acquire the
accounting statements and other operational information of debtor. Debtor should provide its marketing plan, investment plan
and demand for funds. Creditor will keep debtor’s business secret.
3. In order to achieve the purpose of financing
under this contract, the debtor should provide a full, effective guarantee, which is recognized by creditor. If debtor or guarantor
violates the contract, creditor has the right to seize any form of assets of the Debtor or Guarantor that the Creditor possesses
Clause 7 Representations and Commitments
of Debtor
Debtor makes the following representations
and commitments voluntarily, and assumes legal responsibility for the reality of the content.
1. Debtor is a legal representative, which
is established according to the laws of People’s Republic of China, with full capacity for civil conduct. Debtor promises
to provide related information requested by creditor.
2. Debtor can perform all obligations and responsibilities
under this contract, and will assume the repayment responsibility in any conditions.
3. Debtor has the right to sign this contract,
and has acquired all legal approvals and authorities.
4. Signing this contract is allowed by debtor’s
articles of association, internal decisions and resolutions of shareholders and board of directors. This contract will not conflict
with the articles of association, internal decisions and resolutions of shareholders and board of directors and policies of debtor.
5. Signing and performing this contract is the
true willing decision of debtor. Signing and performing the above contract will not violate the laws and regulations, rules and
agreements which can limit debtor. This contract is legal and enforceable, and if this contract become invalid because debtor does
not have full capacity to sign this contract, debtor should repay all losses of creditor.
6. All documents, financial statements and
other information, which are provided by debtor under this contract, are true, complete, accurate and effective.
7. Debtor agrees that bank business under this
contract is limited to the regulations, conventions and practices of creditor, and the power of interpretation belongs to creditor.
8. Debtor cannot change its equity structure
or major executives without written consent of creditor.
9. If debtor does not perform obligations according
to this contract and sub-contract, debtor grants creditor the right to obtain relevant money from any account which is opened in
creditor by debtor.
10. In any transactions after signing this
contract, if the debtor submits any documents related to a specific transaction to creditor for auditing, debtor promises all documents
are true. Creditor neither participates in nor knows the essence of transaction, and will not take any responsibility.
11. The debtor confirms it has no further litigation,
arbitration, or administrative litigation in property, liquidation or issues with going out of business, except situations which
have been disclosure in writing to creditor.
12. If creditor is involved in litigation,
arbitration or another dispute because of performing the obligations under this contract,the litigation or arbitration fees, legal
fees and other expenses of creditor will be borne by the debtor.
13. All settlement businesses under this contract
should be handled through the settlement account open in creditor.
14. The debtor provides full, effective or
other appropriate acceptable guarantee approved by the creditor. For the house mortgage, if the house will be removed, the debtor
shall promptly inform the creditor to fulfill obligations; if mortgage houses were demolished, the creditor has the right to require
the debtor to pay off the debt in advance, or reset the mortgage and sign a new security agreement. During the loss of the original
guarantee and the new mortgage registration has not been completed, the debtor should provide the secured party as guarantees;
For the way of compensation to compensate for the demolition of real estate, the creditor will be responsible for requesting relocation
compensation as guarantee through the opening margin accounts or certificates of deposit , etc.
Clause 8 Debtor has the obligation to disclosure
significant transactions and events to creditor.
1. Debtor should inform creditor of significant
transactions and events of debtor in writing timely.
2. If debtor is a group company, debtor should
inform creditor of its related transactions which are more than 10% of creditor’s net assets, including but not limited to
:
(1) the relationship of the parties in the
transaction;
(2) transactions and transaction properties;
(3) the amount of transaction and relevant
proportion;
(4) pricing policy.
3. During valid period of this contract, stock
transfers, reorganizations, mergers, discrete, shareholding reforms, joint ventures, cooperations, joint operations, contracts,
leases, business scope, change of registered capital, major asset transfers, contingent liabilities, or anything which may affect
debtor’s ability to assume responsibility should be reported to creditor in writing 30 days in advance.
4. A termination of business, going out of business,
bankruptcy, dissolution, cancellation of business license, deterioration of financial situation or involvment in a major business
dispute, or anything may affect debtor’s ability to assume responsibility should be reported to creditor in 7 days by writingfrom
the date the above thing took place.
5. When debtor becomes involveed in major litigation
or arbitration with any third party, or any other significant thing which may affect debtor’s ability to assume responsibility
occurs, creditor should be notified in writing within 7 days from the date debtor receives relevant notice.
6. The debtor promises that it will not use
its legal dispute with a third party to damage creditor’s rights.
Clause 9 Default and default Liability
1. After this contract comes into force, the
creditor and the debtor should perform the obligations as agreed in the contract. If any one party fails to perform or not completely
fulfill its obligations of this contract, it should bear the corresponding liability for breach the contract.
2. If any of the following situations occur,
creditor has the right to terminate the unused credit line under this contract, and ask the debtor to repay all financing, payable
interest and other expenses under this contract immediately.The date the creditor asks the debtor to repay the money is the advanced
expiration date:
(1) any information provided by debtor or the
statements and commitments stated in clause 7 of this contract are false, inaccurate, incomplete or misleading;
(2) deterioration of debtor’s credit
status and obvious weakening of repayment ability (including contingent liability);
(3) the cross default agreed in clause 10 of
this contract occurs to the debtor, the affiliated enterprise of the debtor, the guarantor, or the affiliated enterprise of the
guarantor;
(4) the debtor violates the obligations agreed
to in a sub-contract of this contract;
(5) the debtor fails to repay the principal,
interest and expenses of one financing under this contract on schedule;
(6) the debtor stops repaying its own debt,
or cannot repay due debt;
(7) stopping doing business, going out of business,
being announced bankruptcy, dissolution, cancellation of business license, involving in major business dispute, and deterioration
of finance condition and so on;
(8) other thing which may damage creditor’s
right.
3. If the debtor defaults, creditor has the
right to take one or more following measures:
(1) suspending or reducing the sum of financing,
until cancelling all agreed line of financing;
(2) announcing complete or part of debtor’s
debt expirein advance;
(3) terminating this contract, and asking debtor
to repay all debt and pay relevant expenses;
(4) the debtor should pay punitive interest
for overdue debt;
(5) the debtor should pay punitive interest
for misappropriation of the loan;
(6) requiring the debtor to pay full compensation
for losses.
Clause 10 the cross-defaulting
If one of the following events occurs to the
debtor or affiliated enterprises of the debtor, and the guarantor or the affiliated enterprises of the guarantor, it will be considered
that debtor default as well, the creditor have the right to recover loan in advance according to this contract or its sub-contract,
and require the debtor to be liable for breach of contract according to the contract:
(1) any loan, financing or debt defaults or
may default, or be called for repayment in advance;
(2) any guarantee or similar obligation fails
to be performed or might fail;
(3) the non-performance or violation of the
relevant debt guarantee and other similar obligations of legal document or contract or might;
(4) failure to repay due debts or borrowing/financing;
(5) be declared bankrupt by the legal procedure
or may be so declared;
(6) other situations that endanger the safety
of the money under this contract.
Clause 11 the continuity of obligation
All obligations of the debtor under this contract
have the same effect on its heir apparent, agent, receiver, orassignee, even after a merger, reorganization, or change of name.
Clause 12 accelerated maturity terms of
principal and interest
The debtor and the guarantor agree that once
the debtor fails to perform the statements and commitments of Clause 7, or the debtor fails to perform any obligation under this
contract, the creditor has the right to decide that any other obligations include all outstanding principal, interest (including
punitive interest and compound interest) and relevant expenses become due immediately.
Clause 13 The Priority Right of Subrogation
Arrangement
The debtor states herein, once the debtor defaults
or is unable to repay due principal, interest and fees, and doesnot have enough property to repay advanced money to creditor,creditor
has the right of subrogation on any claim, accounts receivable and other property rights of the debtor. The debtor and the guarantor
are willing to give up the defense to creditor according to article 28 of “Guarantee Law”.
Clause 14 Offset Arrangement
1. If the debtor or the guarantor fail to repay
maturing debt or pay the debt upon early maturity, the creditor has the right to directly withhold money on any account of the
debtor to repay the debt. If the currency in the debtor’s account is different from the currency of principal debt, the withholding
money will be calculated on the rate of withholding day.
2. Creditor’s rights under this contract
will not be offset by any reason or any third party’s offset right.
3. Creditor’s rights under this contract
will not be offset by any offset right of the debtor, the guarantor or any third party.
Clause 15 Applicable Law, Jurisdiction and
Dispute Resolution
1. Signing, effectiveness, performance, termination,
interpretation and dispute settlement of this contract is applicable for the laws of People’s Republic of China.
2. For any dispute of this contract, the debtor
and the creditor should resolve through friendly negotiations. If negotiation fails, both parties agree to solve by the following
section (2) way:
(2) Applying for arbitration to the Shenzhen
Arbitration Commission, resolving the dispute by applicable rules of the Arbitration Commission, the arbitration award is final
and binding on both parties. The site selection is in Shenzhen.
3. In the dispute period, the provisions which
are not involved in the dispute still should be carried out according to this contract.
Clause 16 Files, Communications and Notifications
1. Any documents, communications and notifications
under this contract will be sent to each partyaccording to the address, phone number or other contact methods on the cover of this
contract.
2. If the contact method of one party changed,
the other party should be informed immediately, otherwise the party which does not inform its change to the other must bear full
responsibility for all the consequences.
3. Any documents, communications and notifications
are sent according to above address, shall be deemed to arrive on the following dates:
(1) by post (including speed post, ordinary
letter, registered mail), it will be deemed to arrive on the sending day after five working days;
(2) by facsimile or other electronic communication,
it will be deemed to arrive on sending day;
(3) by personal service, the date of signing
is deemed to be arriving date.
Notifications by the way of website, online
banking, telephone banking or business outlets announcement should be deemed to arrive on day. The creditor does not need to borne
any responsibility for any transmission errors, omissions, or delays of mail, fax, telephone or any other communication system.
4. The two sides
agree that the seal of the office seal, financial seal, contract seal, receive seal and credit seal is the effective seal for the
documents, communications and notifications. All staff of the debtor have right to receive files, communications and notifications.
Clause 17 Effectiveness, Modification of
This Contract and Other Matters
1. The contract will take effect from the date
of signature or stamp of both parties.
2. During the effective period of this contract,
the creditor’s giving to the debtor and the guarantor ofany tolerance, forgiveness, or delay to use the rights and interests,
shall not damage, impact or limit the creditor to share the rights and interests in accordance with relevant laws and regulations
and this contract, or be deemed giving up the rights and interests, also do not affect the debtor to borne any obligation under
this contract.
3. As a result of national laws and regulations
or regulatory policy change, which leads to loan obligations of the creditor under this contract not conforming to the laws and
regulations or regulatory requirements, the creditor has the right to unilaterally terminate the contract, announceall of the loan
is due in advance, and the debtor should pay off the loan immediately.
4. If the creditor cannot issue the loan or
pay on time because of force majeure, the failure of communication or network, or the failure of creditor’s system, the creditor
does not assume any responsibility, but should promptly notifythe debtor.
5. The creditor shall have the right to authorize
or entrust other branches of industrial bank to perform rights and obligations under this contract (including but not limited to
authorized or entrusted bank branches of other related contracts, etc.) according to the debtor’s operation and management,
or the loan under this contract as other branch’s to undertake, which is approvedby the debtor, and without prior consent
of the debtor.
6. The debtor agrees that the creditor has
the right to unilaterally reduce or cancel the unused loan under the contract according to the debtor’s production and operation
situation, situation of payment orcredit of other financial institutions. The creditor should notify the debtor five working days
before reduce or cancel the loans, without prior consent of the debtor.
7. At any time, any provision of this contract
in any way is or becomes illegal, invalid or unenforceable, the legality, validity or enforceability of other provisions under
the contract is not affected.
8. The heading of this contract is just for
the convenience of reading, which shall not be used for interpretation or any other purposes.
9. The attachment is an integral part of this
contract, and the attachment of this contract is equally valid.
10. This contract is triplet, the creditor
holds two copies, the debtor holds one copy, with equal legal effect.
Clause 18 The Notarization and Voluntarily
to Accept Compulsory Execution
1. The contract should be notarized by the
state notary office for if any party request notarization.
2. The notarized contract have the enforcement
effect, if the debtor fails to perform the debt, or the creditor realize creditor's rights according to laws and regulations and
this contract, the creditor shall have the right to directly apply the people's court with jurisdiction for enforcement.
Clause 19 The Supplementary Terms and Conditions:
/s/ [COMPANY SEAL]
The Creditor (official seal):
The legal representative (signature):
The Debtor (official seal):
The legal representative (signature):
/s/ Dangyu Pan
Exhibit 10.2(a)
Maximum Amount Guaranty Contract
(Apply to lines of credit)
Reference: Xing Yin Shen Longgang credit (guarantee)
zi (2014) No. 0504A
Creditor: Industrial Bank Co., Ltd. , Shenzhen
Longgang Branch
Address: parkland, longxiang road, longgang
town,shenzhen
Legal Representative / CEO: Jinkui Li
Contact: Jinlong Huang
Address:
Postal Code: |
Fax : |
Tel: 0755-33837817 |
Fax: |
Guarantor: Dangyu Pan
Address: Building A1, 68 Xinxia Street, Pinghu,
Longgang, Shenzhen, Guangdong, China
Legal Representative / CEO: Dangyu Pan
Contact:
Address:
Postal Code: |
Fax : |
Tel: 0755-89686939 |
Fax: |
Contract Location: Industrial Bank Building,
Industrial Bank Co., Ltd. Shenzhen Branch
Important notes:
For protecting your rights and interests, please
read, check and confirm following items carefully before signing:
1. You have the right to
sign this contract. Or you have been given sufficient authority legally.
2. You have read and understood
this contract carefully and sufficiently, and have paid attention on assuming, exempting or limiting responsibilities of Industrial
Bank Co., Ltd., and the content with bold font.
3. Your company and you
have understood the meaning of this contract and relevant legal consequence, and agree to accept these provisions.
4. The contract provided
by Industrial Bank Co., Ltd. is a model contract. There is space for modifying, supplement and deleting.
5. If you have further
questions to this contract, please consult Industrial Bank Co., Ltd.
The guarantor is voluntary
as a financier ("creditor") to provide security for the line of credit of the applicant Springpower Technology (Shenzhen)
Co., Ltd. (or "debtor"). In order to clarify the rights and duties, abide by credit, the contracting parties signed this
contract in accordance with relevant laws and regulations to comply with.
Article 1 definition and interpretation
In addition to agreed in writing by both parties,
then:
1. The master contract
(as defined below) agreed definitions and interpretations applicable to this contract.
2. The "claims"
or called the principal debt, means the debt approval and provided by the creditor, including loans, lending, trade finance (including
but not limited to issuing letters of credit, trust receipts, packing loans, export financing, export collection bills and import
bills, etc.), bankers' acceptances, discounted bills , bills buyback, guarantees (including the Independent guarantees, see demand
guarantees and standby letters of credit, etc.) and other financing business (including principal, interest, penalty interest,
compound interest, liquidated damages, damages, cost of achieving the claim).
Under this contract, the
claim of the financier and the debt of the applicant mean the same content.
3. The "principal"
refers to the principal debt made by the business transacted by the financier, including but not limited to the principal loans,
trade finance capital, bankers' acceptances fare, bill discounting, money advanced for credit of letter, the principal part of
guaranteed by the creditor for the debtor.
4. The "guaranteed maximum principal"
means the amount agreed by both parties in order to clarify the scope of the claims guaranteed by the covenant. Regardless of times
and sum of the debt, the guarantor takes joint liability for all debt under the guaranteed maximum principal.
5. The "validity of
guarantee" refers to a continuous uninterrupted period agreed by both parties in order to clarify the scope of the claims
by the covenant. The debt happened during the period, whether the settlement deadline is over that period or not, the guarantor
takes joint liability for all debt under the guaranteed maximum principal.
6. "The cost of the
claim for the creditor" refers to the necessary fees of achieving the credit, including take litigation, arbitration and other
ways to pay litigation (arbitration) fees, legal fees, travel expenses, execution fees, security fees, and other expenses.
7. "Master Contract"
means credit contract (that is, "General Agreement") and all sub-contract signed by the financier and the applicant.
"Sub-contract" means based on the
basic or special contract, the contract signed by both parties after getting approval of the creditor, include the content of each
sum, the due date and other rights and obligations. The sub-contract is an integral part of the basic or special contract, with
the same legal effect. The forms of contract can be different according to business needs, as the application of L/C, bills or
other manner considered fit by the creditor. If the master contract and sub-contract has different part, the sub-contract will
be effective.
8. This "working day"
refers to the bank business day, If a withdrawal or repayment date is not a Business Day, delay to the next business day.
Article 2 the main credit contract of guarantee
The master contract of
guarantee is Basic Credit Line Contract (No. XingYin ShenLonggang credit zi (2014) No. 0504), and its sub-contracts. The
sum of credit is RMB forty million only, credit period is from Oct 23th 2014 to Oct 23th 2015.
The guarantor will be borne
joint liability for all debts under the master contract.
Article 3 Maximum guarantee principal
1. Under this contract,
maximum guarantee principal is RMB (in word) FORTY MILLION YUAN ONLY.
2. Under the maximum guarantee
principal, the guarantor is borne joint liability for all debt balance (including principal, interest, penalty, compound interest,
liquidated damages, damages, realization of claims).
Article 4 validity of guarantee
1. Valid period is from
Oct 23th 2014 to Oct 23th 2015.
2. The loan under the contract
can be used only when during the period of validity, but the guarantor is borne joint liability for each debt whether the debt
is in or over the validity of the guarantee contract.
Article 5 guarantee responsibility
1. The guarantor is borne
joint liability under this contract. For whatever reason, if the applicant fails to fulfill due debts under the master contract
(including but not limited to early recovery of debts because of the default of the applicant or the guarantor's request), the
guarantor shall perform the repayment obligation on behalf of the debtor.
2. If there are several
guarantors under this contract, all guarantors shall jointly bear joint responsibility.
3. Main debts expire, the
debtor fails to repay the debt and interest, the guarantor shall perform the repayment obligation.
4. Furthering the period
of the main debt, if the creditor recovers the debt in advance according to the master contract, the guarantor shall bear joint
responsibility for this and other debts under the guarantee contract.
Article 6 scope of guarantee
1. The financial claims
under this contract ("the secured claims") refers to all debts provided by the creditor to the debtor, including but
not limited to the principal debt, interest (including default interest, compound interest), breach of contract , damages , expenses
of claims.
2. On the due date, if
the applicant refused to repay the loan, which lead to the debt rights also in the range of the guarantee.
3. The principal , interest and other costs,
the time of performance, usage, rights and obligations of the parties as well as any other relevant matters under the contract
shall prevail by relevant agreements, contracts, application, notice , various certificates and other records, all kinds of certificates
and other relevant legal documents issued or signed without guarantor’s confirmation.
4. In order to avoid ambiguity,
all fees of prepare, improve, perform or enforce the contract (including, but not limited to attorney’s fees, litigation
or arbitration costs etc.) constitute a part of the secured debt.
Article 7 warranty period
The warranty period under
the contract:
1. The warranty period
under the contract is calculated according to each financing applied by the applicant. For each financing, the warranty period
is ended after two years of the expiration.
2. If there are several
financings in one master contract, the warranty period of each financing is ended after two years of the expiration.
3. If the principal debt is repayable in installments,
there are several financings in one master contract, each warranty period is calculated in installments, and the guarantor shall
bear responsibility for two years from the date of expiry.
4. If any extension agreement
is signed by financier and debtor without agreed by the guarantor, the guarantor will still bear responsibility for all financing
under the contract within two years from the date of extension expiry.
5. If the financier decides
to recover the debts in advance, the warranty period is two years since the date of expiry noticed by the financier.
6. The warranty period
of bankers' acceptances, letters of credit and letters of guarantee is two years from the date of advance payments. If advance
for several times, warranty period is calculated from each advance payment.
7. The warranty period
of commercial bills is two years from the date of discount maturity.
Article 8 on demand
As long as financiers submitted
notification of debt collection to the guarantor with the contract number and the amount of debt, the guarantor shall immediately
perform the repayment and give up all reasons of defense.
Article 9 declaration and commitment of
guarantor
The guarantor voluntarily
made the following statement and commitment, and liable for its truthfulness:
1. The guarantor is established
under the laws and a validly existing legal company, with full civil capacity. The guarantor follows the creditor's request to
provide relevant evidence, permits, certificates and other documents required by the creditor.
2. The guarantor has sufficient
capacity to fulfill all the obligations and responsibility under the contract, not because of any instruction, financial conditions
change, or any agreement with any party to reduce or waive their commitment to settle the obligation.
3. The guarantor has sufficient
power, authority and legal right to sign this contract, the guarantor has obtained and fulfilled all necessary approvals and authorizations
of its internal or other relevant procedures to make the contract execution and performance, and has achieved and fulfilled any
government department or other authority's approval, registration, authorization, consent, license or other relevant procedures
for this contract, and signed this contract with all the necessary approvals, registrations, consents, licenses , authorizations
and other related procedures remain fully valid.
4. The guarantor signed the contract in full
compliance with the relevant Articles of the guarantor, the internal decisions, shareholders and board resolution. The contract
does not conflict with any charter, internal decisions, shareholders resolutions, board resolution and the guarantor's policies.
5. The execution and performance
of this contract is based on the guarantor's true intention. Loan facility is compliance with legal and regulatory requirements,
execution and performance of this contract does not violate any binding law, regulation, ordinance or the contract. This contract
is valid and enforceable, as a result of the guarantor’s defects in the execution and performance of this contract to result
in the contract is invalid, the guarantor will immediately and unconditionally make compensation for all losses to the creditor.
6. Under this contract,
all the documents, financial statements and other information provided by the guarantor is true, complete, accurate and effective,
and continue to fulfill the creditor’s request of the financial indicators.
7. Such as a change in
ownership structure or key management personnel or other significant events and significant transactions, the guarantor shall require
the prior written consent of the financer.
8. If the guarantor fails to fulfill the contract
obligations, the guarantor hereby authorizes the creditor recover the funds from all branches accounts of the guarantor without
going through the judicial process.
9. When the guarantor has
fulfilled the guarantee responsibilities, the guarantor has the right to recover the money from the applicant without prejudice
the repayment in the future. However, if the applicant has the claim of the guarantor and the requirement of repayment from the
financier at the same time, the guarantor agreed the applicant to repay the debt of the financier first.
10. If the applicant and
the guarantor have or will sign a counter- guarantee contract in respect of the obligations under the contract, the counter-guarantee
contract shall not prejudice any rights of the financier in law or in fact under the contract.
11. Before pay off the
debts, regardless of any reason lead to reduce the guarantee ability of guarantor, the financier has the right to require the guarantor
to provide a new full and effective guarantee.
12. When he applicant fails
to fulfill obligations, regardless of the financier has other guarantee right of the debts, (including, but not limited to warranties,
mortgage, pledge, guarantees, standby letters of credit and any other form of guarantee), the guarantor shall bear full responsibility
to ensure the security and waive all defenses on law and property law.
13. There was no any litigation, arbitration
or administrative proceedings for the guarantor’s outstanding or known to occur on the guarantor, and there was no events
of liquidation or other similar proceedings whether it comes forward by the guarantor or by a third party.
14. If the creditor is
forced into disputes between the guarantor and any other party because of fulfilling the obligations under the contract, the guarantor
should pay litigation or arbitration costs, legal costs and other expenses.
15. During warranty period,
the guarantor undertakes not to transfer, conceal property, or give up, passive exercise claims in any way.
Article 10 Obligations of disclosing important
transactions and events
1.Guarantor should inform
financer of significant transactions and events of guarantor in written timely.
2. During valid period of this contract, stock
transfer, reorganization, merger, discrete, shareholding reform, joint venture, cooperation, joint operation, contract, lease,
business scope, change of registered capital, major asset transfer, contingent liability, or anything which may affect guarantor’s
ability of assuming responsibility should be notified to financer in writing 30 days in advance.
3. Termination of business, going out of business,
bankruptcy, dissolution, cancellation of business license, deterioration of financial situation or involving in major business
dispute, or anything may affect guarantor’s ability to assume responsibility should be noticed to financer in 7 days by written
since the date above things take place.
4. When guarantor involves
in major litigation or arbitration with any third party, or other significant thing which may affect guarantor’s ability
to assume responsibility, financer should be notified by written in 7 days since the date guarantor receives relevant notice.
5. The guarantor promises
that it will not use its legal dispute with third party to damage financer’s right.
Article 11 events of default and breach
of contract
1. Since this contract
comes into force, the financer and the guarantor shall perform the obligations as agreed in the contract, any one party fails to
perform or not completely fulfill the obligation of this contract, shall bear the corresponding liability for breach of contract.
2. One of the following
circumstances occurs, the financier has the right to require the guarantor immediately to fulfill the repayment obligations:
(1) Any information provided
by guarantor and the statements and commitments stated in Article 9 of this contract are false, inaccurate, incomplete and misunderstood.
(2) Deterioration of guarantor’s
credit status and obvious weakening of repayment ability (including contingent liability);
(3) the guarantor violates
of the foregoing provisions of Article 10, not disclose the significant transactions and events;
(4) Stopping doing business,
going out of business, being announced bankruptcy, dissolution, cancellation of business license, involving in major business dispute,
and deterioration of finance condition and so on;
(5) Other thing which may
damage financer’s right.
3. If the guarantor defaults,
financer has the right to take one or more following measures:
(1) require the guarantor
to remedy;
(2) require the guarantor
to provide a new full and effective guarantee;
(3) require the guarantor
to perform guarantee obligation in advance;
(4) require the guarantor
to repay all direct or indirect losses for breach of contract.
The guarantor shall make
the implementation of the above measures and waive all defenses.
Article 12 the independence of the guarantor’s
obligations
1. The guarantor's obligations
under this contract have independence with no effect of the relationship between any party and the third party, except there are
stipulates.
2. The guarantee contract
has independence, regardless of any conditions; the guarantee contract is effective even if the master contract is not effective.
If the master contract is confirmed as invalid, then the guarantor still bear the joint liability for the debtor’s debts.
3. If the applicant violates the master contract
(including but not limited to the applicant fails to use the loan under the sub-contract) , shall not affect the liability of guarantee,
the guarantor cannot require to reduce or waive the responsibility of guarantee.
4. The main creditor under
the contract expires or the guarantor fails to perform under this contract, the financier has the right to directly deduct the
funds from any account of the guarantor.
5. As under the master
contract , there are other guarantees ( including but not limited to guarantee , mortgage , pledge, standby and any other form
of security ) , the guarantor agrees that one can give up part of security interest or security interest subordinated ( including
the collateral is based on the collateral provided by the debtor) , financier and any mortgagor / pledgor (including the mortgagor
/ pledgor artificially is the debtor himself) can be varied by agreement and subordinated security interest, the amount of the
secured creditor and other content, even if financiers made the above act, the guarantor is still voluntary to bear all responsibility
of this contract.
6. The guarantor agrees and acknowledges: the
financer and the applicant agree to alter the master contract are deemed to have the prior consent of the guarantor, the guarantor
cannot reduce the responsibility because of this.
7. Before the maximum guarantee
claims determined, the financer has the right to transfer part or all guarantee rights without the prior consent of the guarantor.
Article 13 the continuity of obligation
1. All the guarantor's
obligations under this contract have continuity, for his heir apparent, agent, receiver, the assignee and the main company after
merger, reorganization, change the name is completely and equally binding.
2. The guarantor hereby
acknowledges, financiers can continuously and cyclically to provide financing to the applicant under the contract, the guarantor
has joint for liability of all claims, regardless of the times and sum of each financing.
3. The contract is a continuing
guarantee, the guarantor shall bear responsibility of guarantee until the debts is paid off.
4. All or part of the release
or discharge of the secured creditor based on any payments, guarantees or other disposition which have been declared invalid or
must be repaid, the guarantor’s responsibility will be remain in force.
Article 14 priority subrogation arrangements
The guarantor states that,
once the guarantor cannot assume security responsibility, and the guarantor itself has not sufficient property to be repaid, the
financier has priority right of any claims against third parties, accounts receivable and other property interests. The guarantor
will voluntarily relinquish the defenses against the financier under Article 28 of "security law".
Article 15 offsetting arrangements
The right of the financier
under the contract cannot offsetting by the guarantor’s or any other party’s right of offsetting.
Article 16 Applicable Law, Jurisdiction
and Dispute Resolution
1. Effective performance,
termination, interpretation and dispute settlement etc. of this contract is applicable for china laws.
2. For any dispute about this contract, guarantors
and creditors should resolve through friendly consultations; If friendly negotiation fails, the both parties agree to solve by
the following section (2) :
(2) To Shenzhen Arbitration Commission for arbitration, to resolve
the dispute by the rules of the Arbitration Commission, that the arbitration award is final and binding on both parties. The site
selection is in Shenzhen.
3. at the disputed period,
the part of not involved has still to be carried out.
Article 17 Files, Communications and Notifications
1. Any documents, communication
and notification under this contract shall be sent to the other party by the way of address, phone number or other contact methods
listed in the cover of this contract.
2. If any above contact
method of any party changed, one should notice the other party by any quick way immediately. If one does not notice, one should
be borne for the documents, communication and notification sent through old address, phone number or other contact methods listed
in the cover of this contract.
3. Any documents, communications
and notifications sent by the way of the above address, shall be deemed to arrive on the following dates:
(1) by post (including
speed post, ordinary letter, registered mail), it will be deemed to arrive on the day after five working day;
(2) by facsimile or other
electronic means of communication, it will be deemed to arrive on day;
(3) by personal delivery,
the date of recipient is deemed to be arriving date.
Notifications by the way
of website, online banking, telephone banking or business outlets announcement should be deemed to arrive on day. The creditor
does not need to borne any responsibility for any transmission errors, omissions, or delays of mail, fax, telephone or any other
communication system.
4. The two sides agreed
that the seal of the office seal, financial seal, contract seal, receive seal and credit seal is the effective seal for the documents,
communications and notifications. All staves of the debtor have right to receive files, communications and notifications.
Article 18 the contract effectiveness and
other matters
1. The contract shall take
effect from the date of signature or stamp of both parties..
2. Any modification and
supplement to this contract is effective, through the guarantor and financiers made mutual consent in writing by the legal representative
/ responsible person or his authorized representative signature and official seal.
3. After the effective
of this contract, the master contract signed by the financier and the applicant does not need to be confirmed by the guarantor.
4. During the effective
period of this contract, the creditor gives to the debtor and the guarantor any tolerance, forgiveness, or delay to use the rights
and interests, shall not damage, impact or limit the creditor to share the rights and interests in accordance with relevant laws
and regulations and this contract, or to be deemed giving up the rights and interests, also do not affect the guarantor to borne
any obligation under this contract.
5. The creditor shall have the right to authorize
or entrust other branch of industrial bank to perform rights and obligations under this contract (including but not limited to
authorized or entrusted bank branches of other related contracts, etc.) according to the debtor’s operation and management,
or the loan under this contract as other branch’s to undertake, without prior consent of the guarantor, and the guarantor
still bear the responsibility of guarantee.
6. The attachment is an
integral part of this contract, and the attachment of this contract is equally valid.
7. During the period of
the line of credit, if the series of contracts, agreements and other legal documents are not explicitly for the contract of guarantee,
that shall be deemed as a guarantee by the guarantee contract.
8. This contract is triplet,
the creditor holds two copies, the guarantor holds one copy, with equal legal effect.
Article 19 the notarization and voluntarily
to accept compulsory execution
1. The contract should
be in the provisions of the state notary office for notarization if any party request notarization.
2. The notarized contract
have the enforcement effect, if the debtor fails to perform the debt or the creditor shall realize creditor's rights according
to laws and regulations and this contract, the creditor shall have the right to directly apply the people's court with jurisdiction
for enforcement.
Article 20 supplement:
The creditor (official seal): /s/ [COMPANY
SEAL]
the legal representative (signature):
The guarantor (official seal): /s/ [COMPANY
SEAL]
the legal representative (signature):
Exhibit 10.2(b)
Maximum Amount Guaranty Contract
(Apply to lines of credit)
Reference: Xing Yin Shen Longgang credit (guarantee)
zi (2014) No. 0504
Creditor: Industrial Bank Co., Ltd. , Shenzhen
Longgang Branch
Address: parkland, longxiang road, longgang
town,shenzhen
Legal Representative / CEO: Jinkui Li
Contact: Jinlong Huang
Address:
Postal Code: |
Fax : |
Tel: 0755-33837817 |
Fax: |
Guarantor: Shenzhen Highpower Technology Co.,
Ltd.
Address: Building A1, 68 Xinxia Street, Pinghu,
Longgang, Shenzhen, Guangdong, China
Legal Representative / CEO: Dangyu Pan
Contact:
Address:
Postal Code: |
Fax : |
Tel: 0755-89686939 |
Fax: |
Contract Location: Industrial Bank Building,
Industrial Bank Co., Ltd. Shenzhen Branch
Important notes:
For protecting your rights and interests, please
read, check and confirm following items carefully before signing:
1. You have the right to
sign this contract. Or you have been given sufficient authority legally.
2. You have read and understood
this contract carefully and sufficiently, and have paid attention on assuming, exempting or limiting responsibilities of Industrial
Bank Co., Ltd., and the content with bold font.
3. Your company and you
have understood the meaning of this contract and relevant legal consequence, and agree to accept these provisions.
4. The contract provided
by Industrial Bank Co., Ltd. is a model contract. There is space for modifying, supplement and deleting.
5. If you have further
questions to this contract, please consult Industrial Bank Co., Ltd.
The guarantor is voluntary
as a financier ("creditor") to provide security for the line of credit of the applicant Springpower Technology (Shenzhen)
Co., Ltd. (or "debtor"). In order to clarify the rights and duties, abide by credit, the contracting parties signed this
contract in accordance with relevant laws and regulations to comply with.
Article 1 definition and interpretation
In addition to agreed in writing by both parties,
then:
1. The master contract
(as defined below) agreed definitions and interpretations applicable to this contract.
2. The "claims"
or called the principal debt, means the debt approval and provided by the creditor, including loans, lending, trade finance (including
but not limited to issuing letters of credit, trust receipts, packing loans, export financing, export collection bills and import
bills, etc.), bankers' acceptances, discounted bills , bills buyback, guarantees (including the Independent guarantees, see demand
guarantees and standby letters of credit, etc.) and other financing business (including principal, interest, penalty interest,
compound interest, liquidated damages, damages, cost of achieving the claim).
Under this contract, the
claim of the financier and the debt of the applicant mean the same content.
3. The "principal"
refers to the principal debt made by the business transacted by the financier, including but not limited to the principal loans,
trade finance capital, bankers' acceptances fare, bill discounting, money advanced for credit of letter, the principal part of
guaranteed by the creditor for the debtor.
4. The "guaranteed maximum principal"
means the amount agreed by both parties in order to clarify the scope of the claims guaranteed by the covenant. Regardless of times
and sum of the debt, the guarantor takes joint liability for all debt under the guaranteed maximum principal.
5. The "validity of
guarantee" refers to a continuous uninterrupted period agreed by both parties in order to clarify the scope of the claims
by the covenant. The debt happened during the period, whether the settlement deadline is over that period or not, the guarantor
takes joint liability for all debt under the guaranteed maximum principal.
6. "The cost of the
claim for the creditor" refers to the necessary fees of achieving the credit, including take litigation, arbitration and other
ways to pay litigation (arbitration) fees, legal fees, travel expenses, execution fees, security fees, and other expenses.
7. "Master Contract"
means credit contract (that is, "General Agreement") and all sub-contract signed by the financier and the applicant.
"Sub-contract" means based on the
basic or special contract, the contract signed by both parties after getting approval of the creditor, include the content of each
sum, the due date and other rights and obligations. The sub-contract is an integral part of the basic or special contract, with
the same legal effect. The forms of contract can be different according to business needs, as the application of L/C, bills or
other manner considered fit by the creditor. If the master contract and sub-contract has different part, the sub-contract will
be effective.
8. This "working day"
refers to the bank business day, If a withdrawal or repayment date is not a Business Day, delay to the next business day.
Article 2 the main credit contract of guarantee
The master contract of
guarantee is Basic Credit Line Contract (No. XingYin ShenLonggang credit zi (2014) No. 0504), and its sub-contracts. The
sum of credit is RMB forty million only, credit period is from Oct 23th 2014 to Oct 23th 2015.
The guarantor will be borne
joint liability for all debts under the master contract.
Article 3 Maximum guarantee principal
1. Under this contract,
maximum guarantee principal is RMB (in word) FORTY MILLION YUAN ONLY.
2. Under the maximum guarantee
principal, the guarantor is borne joint liability for all debt balance (including principal, interest, penalty, compound interest,
liquidated damages, damages, realization of claims).
Article 4 validity of guarantee
1. Valid period is from
Oct 23th 2014 to Oct 23th 2015.
2. The loan under the contract
can be used only when during the period of validity, but the guarantor is borne joint liability for each debt whether the debt
is in or over the validity of the guarantee contract.
Article 5 guarantee responsibility
1. The guarantor is borne
joint liability under this contract. For whatever reason, if the applicant fails to fulfill due debts under the master contract
(including but not limited to early recovery of debts because of the default of the applicant or the guarantor's request), the
guarantor shall perform the repayment obligation on behalf of the debtor.
2. If there are several
guarantors under this contract, all guarantors shall jointly bear joint responsibility.
3. Main debts expire, the
debtor fails to repay the debt and interest, the guarantor shall perform the repayment obligation.
4. Furthering the period
of the main debt, if the creditor recovers the debt in advance according to the master contract, the guarantor shall bear joint
responsibility for this and other debts under the guarantee contract.
Article 6 scope of guarantee
1. The financial claims
under this contract ("the secured claims") refers to all debts provided by the creditor to the debtor, including but
not limited to the principal debt, interest (including default interest, compound interest), breach of contract , damages , expenses
of claims.
2. On the due date, if
the applicant refused to repay the loan, which lead to the debt rights also in the range of the guarantee.
3. The principal , interest and other costs,
the time of performance, usage, rights and obligations of the parties as well as any other relevant matters under the contract
shall prevail by relevant agreements, contracts, application, notice , various certificates and other records, all kinds of certificates
and other relevant legal documents issued or signed without guarantor’s confirmation.
4. In order to avoid ambiguity,
all fees of prepare, improve, perform or enforce the contract (including, but not limited to attorney’s fees, litigation
or arbitration costs etc.) constitute a part of the secured debt.
Article 7 warranty period
The warranty period under
the contract:
1. The warranty period
under the contract is calculated according to each financing applied by the applicant. For each financing, the warranty period
is ended after two years of the expiration.
2. If there are several
financings in one master contract, the warranty period of each financing is ended after two years of the expiration.
3. If the principal debt is repayable in installments,
there are several financings in one master contract, each warranty period is calculated in installments, and the guarantor shall
bear responsibility for two years from the date of expiry.
4. If any extension agreement
is signed by financier and debtor without agreed by the guarantor, the guarantor will still bear responsibility for all financing
under the contract within two years from the date of extension expiry.
5. If the financier decides
to recover the debts in advance, the warranty period is two years since the date of expiry noticed by the financier.
6. The warranty period
of bankers' acceptances, letters of credit and letters of guarantee is two years from the date of advance payments. If advance
for several times, warranty period is calculated from each advance payment.
7. The warranty period
of commercial bills is two years from the date of discount maturity.
Article 8 on demand
As long as financiers submitted
notification of debt collection to the guarantor with the contract number and the amount of debt, the guarantor shall immediately
perform the repayment and give up all reasons of defense.
Article 9 declaration and commitment of
guarantor
The guarantor voluntarily
made the following statement and commitment, and liable for its truthfulness:
1. The guarantor is established
under the laws and a validly existing legal company, with full civil capacity. The guarantor follows the creditor's request to
provide relevant evidence, permits, certificates and other documents required by the creditor.
2. The guarantor has sufficient
capacity to fulfill all the obligations and responsibility under the contract, not because of any instruction, financial conditions
change, or any agreement with any party to reduce or waive their commitment to settle the obligation.
3. The guarantor has sufficient
power, authority and legal right to sign this contract, the guarantor has obtained and fulfilled all necessary approvals and authorizations
of its internal or other relevant procedures to make the contract execution and performance, and has achieved and fulfilled any
government department or other authority's approval, registration, authorization, consent, license or other relevant procedures
for this contract, and signed this contract with all the necessary approvals, registrations, consents, licenses , authorizations
and other related procedures remain fully valid.
4. The guarantor signed the contract in full
compliance with the relevant Articles of the guarantor, the internal decisions, shareholders and board resolution. The contract
does not conflict with any charter, internal decisions, shareholders resolutions, board resolution and the guarantor's policies.
5. The execution and performance
of this contract is based on the guarantor's true intention. Loan facility is compliance with legal and regulatory requirements,
execution and performance of this contract does not violate any binding law, regulation, ordinance or the contract. This contract
is valid and enforceable, as a result of the guarantor’s defects in the execution and performance of this contract to result
in the contract is invalid, the guarantor will immediately and unconditionally make compensation for all losses to the creditor.
6. Under this contract,
all the documents, financial statements and other information provided by the guarantor is true, complete, accurate and effective,
and continue to fulfill the creditor’s request of the financial indicators.
7. Such as a change in
ownership structure or key management personnel or other significant events and significant transactions, the guarantor shall require
the prior written consent of the financer.
8. If the guarantor fails to fulfill the contract
obligations, the guarantor hereby authorizes the creditor recover the funds from all branches accounts of the guarantor without
going through the judicial process.
9. When the guarantor has
fulfilled the guarantee responsibilities, the guarantor has the right to recover the money from the applicant without prejudice
the repayment in the future. However, if the applicant has the claim of the guarantor and the requirement of repayment from the
financier at the same time, the guarantor agreed the applicant to repay the debt of the financier first.
10. If the applicant and
the guarantor have or will sign a counter- guarantee contract in respect of the obligations under the contract, the counter-guarantee
contract shall not prejudice any rights of the financier in law or in fact under the contract.
11. Before pay off the
debts, regardless of any reason lead to reduce the guarantee ability of guarantor, the financier has the right to require the guarantor
to provide a new full and effective guarantee.
12. When he applicant fails
to fulfill obligations, regardless of the financier has other guarantee right of the debts, (including, but not limited to warranties,
mortgage, pledge, guarantees, standby letters of credit and any other form of guarantee), the guarantor shall bear full responsibility
to ensure the security and waive all defenses on law and property law.
13. There was no any litigation, arbitration
or administrative proceedings for the guarantor’s outstanding or known to occur on the guarantor, and there was no events
of liquidation or other similar proceedings whether it comes forward by the guarantor or by a third party.
14. If the creditor is
forced into disputes between the guarantor and any other party because of fulfilling the obligations under the contract, the guarantor
should pay litigation or arbitration costs, legal costs and other expenses.
15. During warranty period,
the guarantor undertakes not to transfer, conceal property, or give up, passive exercise claims in any way.
Article 10 Obligations of disclosing important
transactions and events
1.Guarantor should inform
financer of significant transactions and events of guarantor in written timely.
2. During valid period of this contract, stock
transfer, reorganization, merger, discrete, shareholding reform, joint venture, cooperation, joint operation, contract, lease,
business scope, change of registered capital, major asset transfer, contingent liability, or anything which may affect guarantor’s
ability of assuming responsibility should be notified to financer in writing 30 days in advance.
3. Termination of business, going out of business,
bankruptcy, dissolution, cancellation of business license, deterioration of financial situation or involving in major business
dispute, or anything may affect guarantor’s ability to assume responsibility should be noticed to financer in 7 days by written
since the date above things take place.
4. When guarantor involves
in major litigation or arbitration with any third party, or other significant thing which may affect guarantor’s ability
to assume responsibility, financer should be notified by written in 7 days since the date guarantor receives relevant notice.
5. The guarantor promises
that it will not use its legal dispute with third party to damage financer’s right.
Article 11 events of default and breach
of contract
1. Since this contract
comes into force, the financer and the guarantor shall perform the obligations as agreed in the contract, any one party fails to
perform or not completely fulfill the obligation of this contract, shall bear the corresponding liability for breach of contract.
2. One of the following
circumstances occurs, the financier has the right to require the guarantor immediately to fulfill the repayment obligations:
(1) Any information provided
by guarantor and the statements and commitments stated in Article 9 of this contract are false, inaccurate, incomplete and misunderstood.
(2) Deterioration of guarantor’s
credit status and obvious weakening of repayment ability (including contingent liability);
(3) the guarantor violates
of the foregoing provisions of Article 10, not disclose the significant transactions and events;
(4) Stopping doing business,
going out of business, being announced bankruptcy, dissolution, cancellation of business license, involving in major business dispute,
and deterioration of finance condition and so on;
(5) Other thing which may
damage financer’s right.
3. If the guarantor defaults,
financer has the right to take one or more following measures:
(1) require the guarantor
to remedy;
(2) require the guarantor
to provide a new full and effective guarantee;
(3) require the guarantor
to perform guarantee obligation in advance;
(4) require the guarantor
to repay all direct or indirect losses for breach of contract.
The guarantor shall make
the implementation of the above measures and waive all defenses.
Article 12 the independence of the guarantor’s
obligations
1. The guarantor's obligations
under this contract have independence with no effect of the relationship between any party and the third party, except there are
stipulates.
2. The guarantee contract
has independence, regardless of any conditions; the guarantee contract is effective even if the master contract is not effective.
If the master contract is confirmed as invalid, then the guarantor still bear the joint liability for the debtor’s debts.
3. If the applicant violates the master contract
(including but not limited to the applicant fails to use the loan under the sub-contract) , shall not affect the liability of guarantee,
the guarantor cannot require to reduce or waive the responsibility of guarantee.
4. The main creditor under
the contract expires or the guarantor fails to perform under this contract, the financier has the right to directly deduct the
funds from any account of the guarantor.
5. As under the master
contract , there are other guarantees ( including but not limited to guarantee , mortgage , pledge, standby and any other form
of security ) , the guarantor agrees that one can give up part of security interest or security interest subordinated ( including
the collateral is based on the collateral provided by the debtor) , financier and any mortgagor / pledgor (including the mortgagor
/ pledgor artificially is the debtor himself) can be varied by agreement and subordinated security interest, the amount of the
secured creditor and other content, even if financiers made the above act, the guarantor is still voluntary to bear all responsibility
of this contract.
6. The guarantor agrees and acknowledges: the
financer and the applicant agree to alter the master contract are deemed to have the prior consent of the guarantor, the guarantor
cannot reduce the responsibility because of this.
7. Before the maximum guarantee
claims determined, the financer has the right to transfer part or all guarantee rights without the prior consent of the guarantor.
Article 13 the continuity of obligation
1. All the guarantor's
obligations under this contract have continuity, for his heir apparent, agent, receiver, the assignee and the main company after
merger, reorganization, change the name is completely and equally binding.
2. The guarantor hereby
acknowledges, financiers can continuously and cyclically to provide financing to the applicant under the contract, the guarantor
has joint for liability of all claims, regardless of the times and sum of each financing.
3. The contract is a continuing
guarantee, the guarantor shall bear responsibility of guarantee until the debts is paid off.
4. All or part of the release
or discharge of the secured creditor based on any payments, guarantees or other disposition which have been declared invalid or
must be repaid, the guarantor’s responsibility will be remain in force.
Article 14 priority subrogation arrangements
The guarantor states that,
once the guarantor cannot assume security responsibility, and the guarantor itself has not sufficient property to be repaid, the
financier has priority right of any claims against third parties, accounts receivable and other property interests. The guarantor
will voluntarily relinquish the defenses against the financier under Article 28 of "security law".
Article 15 offsetting arrangements
The right of the financier
under the contract cannot offsetting by the guarantor’s or any other party’s right of offsetting.
Article 16 Applicable Law, Jurisdiction
and Dispute Resolution
1. Effective performance,
termination, interpretation and dispute settlement etc. of this contract is applicable for china laws.
2. For any dispute about this contract, guarantors
and creditors should resolve through friendly consultations; If friendly negotiation fails, the both parties agree to solve by
the following section (2) :
(2) To Shenzhen Arbitration Commission for arbitration, to resolve
the dispute by the rules of the Arbitration Commission, that the arbitration award is final and binding on both parties. The site
selection is in Shenzhen.
3. at the disputed period,
the part of not involved has still to be carried out.
Article 17 Files, Communications and Notifications
1. Any documents, communication
and notification under this contract shall be sent to the other party by the way of address, phone number or other contact methods
listed in the cover of this contract.
2. If any above contact
method of any party changed, one should notice the other party by any quick way immediately. If one does not notice, one should
be borne for the documents, communication and notification sent through old address, phone number or other contact methods listed
in the cover of this contract.
3. Any documents, communications
and notifications sent by the way of the above address, shall be deemed to arrive on the following dates:
(1) by post (including
speed post, ordinary letter, registered mail), it will be deemed to arrive on the day after five working day;
(2) by facsimile or other
electronic means of communication, it will be deemed to arrive on day;
(3) by personal delivery,
the date of recipient is deemed to be arriving date.
Notifications by the way
of website, online banking, telephone banking or business outlets announcement should be deemed to arrive on day. The creditor
does not need to borne any responsibility for any transmission errors, omissions, or delays of mail, fax, telephone or any other
communication system.
4. The two sides agreed
that the seal of the office seal, financial seal, contract seal, receive seal and credit seal is the effective seal for the documents,
communications and notifications. All staves of the debtor have right to receive files, communications and notifications.
Article 18 the contract effectiveness and
other matters
1. The contract shall take
effect from the date of signature or stamp of both parties..
2. Any modification and
supplement to this contract is effective, through the guarantor and financiers made mutual consent in writing by the legal representative
/ responsible person or his authorized representative signature and official seal.
3. After the effective
of this contract, the master contract signed by the financier and the applicant does not need to be confirmed by the guarantor.
4. During the effective
period of this contract, the creditor gives to the debtor and the guarantor any tolerance, forgiveness, or delay to use the rights
and interests, shall not damage, impact or limit the creditor to share the rights and interests in accordance with relevant laws
and regulations and this contract, or to be deemed giving up the rights and interests, also do not affect the guarantor to borne
any obligation under this contract.
5. The creditor shall have the right to authorize
or entrust other branch of industrial bank to perform rights and obligations under this contract (including but not limited to
authorized or entrusted bank branches of other related contracts, etc.) according to the debtor’s operation and management,
or the loan under this contract as other branch’s to undertake, without prior consent of the guarantor, and the guarantor
still bear the responsibility of guarantee.
6. The attachment is an
integral part of this contract, and the attachment of this contract is equally valid.
7. During the period of
the line of credit, if the series of contracts, agreements and other legal documents are not explicitly for the contract of guarantee,
that shall be deemed as a guarantee by the guarantee contract.
8. This contract is triplet,
the creditor holds two copies, the guarantor holds one copy, with equal legal effect.
Article 19 the notarization and voluntarily
to accept compulsory execution
1. The contract should
be in the provisions of the state notary office for notarization if any party request notarization.
2. The notarized contract
have the enforcement effect, if the debtor fails to perform the debt or the creditor shall realize creditor's rights according
to laws and regulations and this contract, the creditor shall have the right to directly apply the people's court with jurisdiction
for enforcement.
Article 20 supplement:
The creditor (official seal): /s/ [COMPANY
SEAL]
the legal representative (signature):
The guarantor (official seal): /s/ [COMPANY
SEAL]
the legal representative (signature):
Exhibit 10.3
Comprehensive Credit Line Contract
Contract No.: pingyinshenxinzhouzongzi 20141020
No. 001
Party A (Line Grantor): PINGAN BANK CO., LTD.
SHENZHEN BRANCH
Address: NO1099 shennan road, shenzhen
Legal Representative (Principal): Yao Guiping
Tel.: 23480048
Party B (Line Applicant): SHENZHEN HIGHPOWER
TECHNOLOGY CO., LTD.
Address: Building A2, Luoshan Industrial
Park, Pinghu Shanxia Villiage
Legal Representative: Pan Dangyu
Tel.:89686236
Whereas Party B applies Party A for a comprehensive
credit line, in accordance with the Contract Law and other relevant laws and regulations, Party A and Party B hereby make
and enter into this Contract upon consensus through consultation.
Article 1 Credit Line and Category
|
1.1 |
Amount of comprehensive credit line: Party A agrees to grant to Party B a comprehensive credit line of (Currency) RMB (in figures) 70,000,000.00 Yuan (in words) seventy million Yuan only. This line is applicable to multiple-currency credit. The exchange rate of currencies other than RMB shall be converted according to the foreign exchange rate published by Party A when the specific business occurs. |
1.2 |
The period of the comprehensive credit line follows the following (1): |
|
(1) |
From Nov. 12, 2013 to Sep. 17, 2014. |
|
(2) |
___ Year(s) ____ month(s),
calculated from the date when the Contract comes into force. |
During the credit period, the credit line
(√) can be recycled ( ) cannot be recycled, but the sum of the balances of all the credit categories within the credit line
shall not exceed the amount of the comprehensive credit line. When the credit period expires, the unused balance shall become automatically
invalid.
Credit period means
the occurrence period of the specific credit under a line (i.e. the period for determining the debt). The start date of the specific
credit under the line must be included in the credit period and the termination date of the specific credit may exceed the credit
period. The start date and termination date of the specific credit shall accord with the specific credit business contract.
| 1.3 | The
credit granting method of this credit line shall include but not be limited to: |
Loan bank lending, bill acceptance and discount,
overdraft, factoring, security, loan commitment and opening of L/C.
| 1.4 | The
category/credit granting method, amount, interest rate, tariff and term of the specific credit under the line shall accord with
the single credit contract and IOU or other credit vouchers. |
|
1.5 |
Transfer of credit under the line
|
Party B agrees to
transfer the credit line to the following a third party to use (in other words, the following object may use the credit line),
and Party B shall undertake the joint guarantee liability for the principal, interest, default interest and compound interest of
all the debts (including contingent debts) under the line, and the expense for realizing the creditor’s rights (including
but not limited to legal cost, attorney fee, notary fee and execution fee), and other losses and expenses caused to Party A due
to the debtor’s breach of contract. The guarantee period shall be from the date of effectiveness of the specific credit contract
to two years after the expiration of the debt performance term specified in the credit contract (including acceleration of maturity
of debt).
The specific credit-transferred object and amount are as follows:
( )
(the transferee), amount: (converted into) (currency) (in words) ;
( )
(the transferee), amount: (converted into) (currency) (in words) ;
( )
(the transferee), amount: (converted into) (currency) (in words) ;
Article 2 Use of Credit Line
2.1 Signature of this Contract by and between Party A and Party
B shallnot constitute Party A’s credit commitment to Party B. Party B shall present a written application to Party A for
each specific credit business under the line, and Party A shall have the right to make its own decision on whether to grant to
Party B a single credit under the line. If Party A agrees to grant the single credit through examination, Party A and Party B shall
make and enter into a single credit contract additionally according to the business nature.
2.2 Preconditions for use of the credit
line:
(1) Party B has handled the legal procedures (if any) for government
license, approval, registration and delivery for the credit under this Contract according to relevant laws and regulations;
(2) The related security contract
is effective (if any);
(3) Party B has paid off all the expenses
related to this Contract (if any);
(4) Party B meets the credit conditions
specified herein;
(5) There is no adverse change to
the business and financial conditions of Party B and the guarantor (if any);
(6) There is no adverse change to
Party B’s repayment willingness and the guarantee willingness of the guarantor (if any);
(7) Party B has no breach of this
Contract.
2.3 Party A has the right to adjust
the amount of the credit line or ask Party B to add guaranty where there is any change of the exchange rate.
2.4 Party A has the right to supervise
the use of the credit line and the orientation of the credit funds, and Party B shall provide coordination.
2.5 If, prior to or during the use
of the credit line, Party A’s regulatory department requests Party A to control the credit scale or orientation due to change
of national macro-control policies, or Party A is unable to grant to Party B to use the credit line for causes not attributable
to Party A, Party A shall have the right to suspend or terminate the use of this credit line and cancel this Contract, for which
Party B shall have no objection.
Article 3 Repayment
3.1 Party B shall open an account in Party A and deposit the
amount repayable to this account prior to the specified date of repayment.
3.2 Party B shall perform the debt on time when each single
credit within the line expires, or the related credit shall be deemed overdue or advances shall be made.
3.3 Party B hereby irrevocably authorizes Party A to deduct
the principal and interest of the due credit and related expenses from any and all accounts opened by Party B in any banking branch
of Pingan Bank.
Article 4 Party B’s Representations and Warranties
4.1 Party B is a company with good reputation duly established
and validly existing within the jurisdiction of the location where it is located. Party B has all corporate rights and has obtained
the government license and approval for conducting its current business.
4.2 Party B has completed all the authorizations and approvals
necessary for the signature of this Contract. This Contract is the presentation of Party B’s true meaning and may not result
in violation of any agreement or commitment concluded with any a third party. When this Contract is concluded and signed, Party
B has not violate any law, regulation and rule for environmental protection, energy conservation and emission reduction, and pollution
reduction, and Party B promises to strictly abide by such laws, regulations and rules after the conclusion of this Contract.
4.3 Party B is not involved in any litigation, arbitration execution,
appeal and reconsideration procedure and other incident or case which may have major adverse impact on the execution of this Contract,
unless otherwise Party B notified Party A in wiring prior to the conclusion of this Contract.
4.4 Party B shall, within the time limit requested by Party
A, provide its financial statements, number of all opening accounts, loan balance and other relevant materials requested by Party
A. Party B shall ensure the genuine, completeness and objectivity of all the documents and materials provided, which shall have
no false record, misleading representation or material misstatement. The financial statements shall be prepared strictly in accordance
with the Accounting Standards of China.
Article 5 Party B’s Rights and Obligations
5.1 Party B shall open an account in Party A and handle deposit,
settlement and other related services firstly in Party A.
5.2 If Party B is a customer group, it shall give a written
report to Party A within ten days after the date of affiliated transaction of over 10% of net assets. The report contents shall
include the affiliated relation between the transaction parties, transaction item and nature, transaction amount or relevant proportion,
and the pricing policy (including no-money involved transaction or only symbolic-money involved transaction).
A customer group as mentioned herein
shall mean an enterprise or public institution legal person who has the following features:
(1) It directly or indirectly controls or is directly or indirectly
controlled by another enterprise or public institution legal person in respect of stock right or management;
(2) It is jointly controlled by a third party enterprise or
public institution legal person;
(3) Its principal individual investor, key manager or a close
family member (including lineal blood relationship within three generations and collateral blood relationship within two generations)
commonly directly or indirectly controls;
(4) It has other affiliated relationship and may transfer the
assets and profits not on the basis of fair price, which should be deemed as credit management by a customer group.
5.3 If Party B has any one of the following circumstances, it
shall notify Party A thirty days in advance. If Party A thinks it will cause significant impact on the performance of the Contract,
Party B shall obtain Party A’s written consent in advance:
(1) material change to Party B’s operating system, equity
structure, property organizational form and primary business, including but not limited to implementation of contracting, lease,
joint operation, reform of shareholding system, merger, acquisition, joint venture (cooperation), division, establishment of a
subsidiary, trusteeship (takeover), sales of enterprise, transfer of property rights and reduction of capital, etc.;
(2) disposal of important assets, of which the value exceeds
10% of the net assets, by selling, gifting, lending, transferring, mortgaging (pledging) or other means;
(3) its dividends exceed 30% of the net profits after tax of
the current year or exceed 20% of the total undistributed profits;
(4) it adds external investment of over 20% of its net assets
after the credit line becomes valid;
(5) it changes the debt clauses with other bank and pay off
other long-term debt in advance;
(6) Party B repays its shareholder debt;
(7) it applies other bank for a credit line, or provides a third
party with security, or reduces or exempts a third party’s debt, with the debt amount concerned exceeding 20% of its net
assets.
5.4 Party B shall notify Party A within seven working days as
of the date of occurrence or possible occurrence of the following matters, and Party A shall have the right to decide whether to
request Party B to add guaranty or directly take back all the loans as the case may be:
(1) Party B or the guarantor’s business or financial status
is worsened, or there is significant financial loss, loss of assets (including but not limited to loss of assets caused due to
external guarantee) or other financial crisis;
(2) Party B encounters administrative punishment or criminal
sanction or is involved in any significant legal dispute due to its illegal business behavior;
(3) Party B, its shareholder or de facto controlling person,
or the legal representative or key manager of the guarantor is involved in an important case, or its main asset goes under property
preservation or other compulsory measures, or encounters administrative punishment or criminal sanction, or there is any other
incident which causes Party B impossible to perform its duties normally;
(4) Party B or the guarantor provides a third party with guarantee,
causing significant adverse impact on its financial condition or on the performance of its obligations under this Contract;
(5) Party B or the guarantor has the following changes, such
as division, consolidation, major merger, acquisition and reconstruction, disposal of major assets, reduction of capital, winding-up,
cease of business for rectification, liquidation, reorganization, being revoked, being dissolved, bankruptcy, or its business license
is revoked;
(6) there is obvious reduction or loss of the guaranty value,
or dispute about the ownership of the guaranty; or the guaranty is sealed up, detained, frozen, deducted, detained or sold by auction;
or
(7) any other important event or default event which may affect
the business activities of Party B or the guarantor and the loan safety of Party A.
5.5 If Party B changes its domicile, mailing address, telephone
number, business scope, legal representative or other relevant items, it shall notify Party A in writing within seven working days
after the change. In the event that Party B fails to perform the said notification obligation, the notices and documents given
by Party A according to the original mailing address shall be deemed to have been served.
5.6 Party B shall keep reasonable financial ratios within the
service life of the credit line.
( ) The financial indicators shall reach
the following standard within the service life of the credit line:
( ) 5.7 If Party B handles YIDAITONG
business, Party B shall abide by the following stipulations:
(1) Party B shall open settlement accounts in Party A. Party
B shall open payment collection accounts for such three pledge loans as export tax rebates, warehouse warrants and accounts receivable,
and authorize Party A to deduct money directly from these accounts for repayment of this credit.
(2) When the loan is released, Party B shall open in Party A
and use the corporate Internet banking product.
(3) Party B promises to give propriety to handle in Party A
the increase of mortgage/pledge financing, if any.
Article 6 Party A’s Rights and Obligations
6.1 From the second year after the effectiveness of a over one-year
(excluding one-year) line, Party A shall have the right to evaluate the business and financial conditions of Party B and the guarantor
(if any) and the progress of the specific project according to the credit conditions specified in the Contract when the credit
line becomes valid, and adjust the credit line, term and interest rate according to the evaluation result.
Where there is any mortgaged (pledged) property, Party A shall
have the right to ask for valuating the mortgaged (pledged) property by an appraisal agency accepted by Party A each year. If the
value of the mortgaged (pledged) property is declined obviously and is not enough for guaranteeing the debt under the Main Contract,
Party A shall have the right to ask Party B to repay part of the loan or provide other guarantee measures accepted by Party A.
6.2 Party A has the right to ask Party B to provide materials
related to the credit line, enter Party B’s business site, investigate, review and check the use of the credit line and the
assets, financial and business conditions of Party B, for which Party B shall provide coordination. Party A also has the right
to supervise Party B to use the loan for the purpose specified herein.
6.3 Party A shall bear confidentiality obligation for the materials
provided by Party B, except otherwise prescribed by laws and regulations, or specified by a regulatory authority or by both Parties,
or non-confidential information provided by Party B.
Article 7 Breach of Contract
7.1 Any one of the following cases shall be deemed as a default
event referred to herein:
(1) There is overdue interest, overdue
repayment or advance of the credit hereunder, or the credit funds are used not for the purpose specified by both Parties;
(2) Party B violates some of its representations, warranties
and commitments;
(3) Party B violates some of its obligations performable hereunder;
(4) Party B conceals some genuine important information;
(5) Party B or the guarantor evades bank claims through affiliated
transactions or by other means;
(6) Party B or the guarantor has any one of the following behaviors,
being negligent in managing and claiming the creditor’s rights due, or disposing and transferring its main properties free
of charge, or at unreasonable low price or by other improper means, or escaping debts;
(7) Party B illegally get funds or credit from Party A or other
banks by using a false contract and arrangement with a third party, including but not limited to pledge or discount of the notes
receivable and other claims without actual trading background.
(8) Party B or the guarantor violates any other contract (including
but not limited to credit contract, loan contract and guarantee contract) signed with Party A or other banks or any securities
with the nature of debt it issued;
(9) Party B’s guarantor violates the guarantee contract
(including but not limited to guarantee contract, mortgage contract and pledge contract) or has any breach of the guarantee contract,
or the guarantee contract has not taken effect, is invalid or is cancelled; or there is obvious reduction or loss of the guaranty
value, or dispute about the ownership of the guaranty, or the guaranty is sealed up, detained, frozen, deducted, detained or sold
by auction;
(10) There is any case which should be notified under sub-clauses
5.3 and 5.4 herein that Party A thinks effective on the safety of its creditor’s rights; or
(11) The business term of Party B or the guarantor expires within
the credit line period, and Party B or the guarantor fails to handle the procedures for renewal.
7.2 In case of any one of these default events listed in the
preceding clause, Party A shall have the right to take the following actions:
(1) To adjust, cancel or terminate the comprehensive credit
line hereunder, or to adjust the period and amount of the credit line;
(2) To announce immediate maturity of all or part of the credit
under this line; to ask Party B to repay part or all the credit principal, interest and expenses immediately, and pay default interest
for the total credit principal released at the default interest rate from the date of occurrence of the default event until Party
B pays off the total credit principal;
Expenses shall include but not be limited to the attorney fee,
legal cost, arbitration fee, traveling expenses, announcement cost, service fee, execution fee, transfer fee and other relevant
expenses of Party A for realizing its creditor’s rights.
(3) To ask Party B to pay in full the cash deposit for paying
undue acceptance, L/G, L/C or other credit business;
(4) To ask Party B to provide new guarantee measures accepted
by Party A;
(5) To make deduction directly from the account of Party B’s
guarantor to repay all the debts under this Contract and the specific business contract (including the debts Party A requests for
prepayment), without obtaining Party B’s consent in advance;
(6) To exercise the guarantee right, ask the guarantor to perform
guarantee liability, or realize creditor’s rights through disposal of the mortgaged property and/or pledged property;
(7) Party A claims Party B’s debtor for the right of subrogation
or appeal to the court to revoke Party B’s waiving of the creditor’s right due or Party B's transfer of property free
of charge or at an obviously unreasonable low price. Party B shall provide all necessary coordination and assistance according
to Party A’s requirements, and all the costs and expenses caused to Party A arising therefrom shall be borne by Party B;
(8) Other remedial measures prescribed by laws and regulations
and specified in the Contract.
Article 8 Other Provisions
During the period of credit granted
by Party A, Party B and the guarantor shall not make profit distribution.
Article 9 Supplementary Provisions
9.1 ( ) Both Parties agree to handle compulsory
enforcement notarization for this Contract.
If Party B fails to completely pr partly perform the obligations
specified herein when compulsory enforcement notarization is handled by both Parties for this Contract, Party A shall have the
right to apply the original notary public for an enforcement certificate, and apply the competent people’s court (the people’s
court at the location where the person subject to enforcement lives or where the property of the person subject to enforcement
is located) for enforcement holding the original notarial certificate and the enforcement certificate.
(√) No compulsory enforcement
notarization shall be handled for this Contract.
9.2 The application for single credit,
credit contract, IOU and credit vouchers related hereto, other relevant documents and materials confirmed by both Parties, and
the commitment letter and declaration issued by Party B unilaterally to Party A shall be deemed as an integral part of this Contract
and shall have the same equal legal force as this Contract.
9.3 Party B authorizes Party A to inquire Party B’s credit
standing including information about social insurance from the credit information database of the People’s Bank of China,
the credit database established upon approval by the competent credit investigation authorities, or relevant institutions, departments
and individuals. The credit report acquired through inquiry may be used only within the scope prescribed by the interim measures
for administration of credit information database issued by the People’s Bank of China and other relevant laws and regulations.
As agreed by Party B, Party A may provide Party B’s credit information for the credit information database of the People’s
Bank of China and the credit database established upon approval by the competent credit investigation authorities.
9.4 Please confirm the options with √ in the brackets
before the selected items.
9.5 Any and all disputes arising from the execution of the Contract
shall be settled by both Parties through consultation. Where consultation fails, the following (2) shall be adopted for
dispute settlement:
(l) To apply
for arbitration in accordance with the current arbitration rules of the commission. The award of the arbitration shall be final
and binding upon both Parties.
(2) To initiate a lawsuit in the people’s court at the
location where Party A is located;
(3) To initiate a lawsuit in the people's court.
9.6 This Contract shall be governed by the laws of the People's
Republic of China.
9.7 This Contract shall come into force upon the signature of
all the parties hereto (signed or sealed by the authorized signatories and affixed with official seal). If Party B does not use
the line within three months as of the date of effectiveness of this Contract, Party A shall have the right to cancel this Contract
unilaterally.
9.8 This Contract shall be made out in 3 originals for
Party A holding two and Party B, ( ) the guarantor and ( ) the registration authority
each holding one.
Party B hereby represents that it has fully understood all the
terms and conditions of this Contract (especially the bold fonts), and the clauses of the related guarantee contract and other
relevant documents and has taken independent legal consultation (where necessary).
Party A (Seal): PINGAN BANK CO., LTD.
SHENZHEN BRANCH:
Legal Representative (Principal) or Authorized Agent (Signature):
Party B (Seal) SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD.:
Legal Representative or Authorized Agent: /s/ Dangyu Pan
Exhibit 10.3(a)
Loan Contract
Loan Contract
Contract No.: PYSXZDZ 20141020 No. 005
( ) Out of the line
(√) Within the line Line Contract Name: Comprehensive
Credit Line Contract
Line Contract No.: PYSXZZZ 20141020 No.
005
Party A (Lender): PINGAN BANK CO., LTD. SHENZHEN BRANCH
Address: NO.1099 Shennan Road, Shenzhen
Legal Representative (Principal): Yao
Guiping
Tel.: _____________________________________________
Party B (Borrower): SHENZHEN HIGHPOWER
TECHNOLOGY CO., LTD.
Address:Shanxia Villiage, Pinghu
Town, Longgang District, Shenzhen
Legal Representative: Pan Dangyu
Tel.: _____________________________________________
Whereas Party B applies Party A for
a loan, in accordance with the Contract Law and other relevant laws and regulations, Party A and Party B hereby make and
enter into this Contract upon consensus through consultation.
Article 1 Loan
1.1 Loan amount: (currency) USD(in
figures) ¥1,625,000(in words) one million six hundred twenty five thousand Dollar only.
1.2 Loan purpose follows the following
(1):
(1) Specifically, for purchasing
raw materials.
(2) Borrowing for repaying (on-lending)/restructuring,
specifically as follows: repaying the credit line under _________________(contract No. and name).
1.3 The loan term is applicable to the
following (2):
(1) From ____MM ___DD, ____YYYY to ____MM ____DD, ____YYYY.
(2) One ( ) days ( ) months (
√ ) years.
The actual loan amount and the start
and ending date shall accord with the receipt for a loan within the scope specified in this Contract.
In the event that Party B has any event
of default and Party A demands Party B to immediately repay the loan in advance, the loan shall be deemed matured when the event
of default occurs.
If the loan is paid in installment,
the due date for payment of a loan shall not be later than the corresponding date when a loan is paid for the first time.
1.4 Loan interest rate
1.4.1 The loan interest rate of this
Contract shall be determined according to the following standard. The loan interest rate for the first period shall follow that
indicated in the receipt for a loan (please express with “√” in front of the option):
( ) 25% ( ) higher / ( ) lower than
the benchmark interest rate for the same-grade loan issued by the People’s Bank on the date of payment of the loan.
( ) Benchmark interest rate for the
same-grade loan issued by the People’s Bank on the date of payment of the loan ( ) + /( ) - / (floating points).
( ) Benchmark interest rate for the
same-grade loan issued by the People’s Bank on the date of payment of the loan
( ) ( ) LIBOR ( ) HIBOR on the date
of payment of the loan ( ) + /( ) - / (basic points) (applicable to foreign exchange loans only).
Interest shall be charged according
to the actual days of the loan. Daily interest rate of loans in pound and Hong Kong dollar = annual interest rate /365; Daily interest
rate of loans in other currencies = annual interest rate /360.
1.4.2 The method for adjustment of the
loan interest rate under this Contract is as follows (please express with “√” in front of the option):
( ) Adjusted by ________ (month /quarter
/half a year/ year). The adjustment date of interest rate is the following ____
| j | The
date of ________ (every month /every three months /every half a year /every year)
corresponding to the date of payment of the loan; where there is no corresponding day
in a month, the last day of the current month shall be taken as the adjustment date of
interest rate. |
(√ ) A fixed interest rate is
executed hereunder during the loan term.
If the loan interest rate is adjusted,
interest shall be calculated and charged according to the new interest rate after adjustment from the adjustment date of interest
rate. However, if the loan is repaid by installment (including matching the repayment of principal and interest by period, and
matching the principal repayment by period), interest in the current period shall be calculated and charged according to the interest
rate before adjustment and interest after the current period shall be calculated and charged according to the interest rate after
adjustment.
1.4.3 In case of adjustment of the benchmark
interest rate for several times, Party A shall make adjustment according to the latest benchmark interest rate on the adjustment
date. If the loan interest rate specified above is lower than the lower line of the interest rate stipulated by the People’s
Bank of China after the People’s Bank of China adjusts the floating range of the benchmark interest rate, the loan interest
rate hereunder shall be adjusted to be the lower line of the interest rate stipulated by the People’s Bank of China. If the
People’s Bank of China does not publish the benchmark interest rate any longer, the loan interest rate hereunder shall be
adjusted to the inter-bank interest rate for same-grade loans recognized or commonly used in the corresponding period, unless otherwise
agreed by both Parties.
1.4.4 In case of any national change
to the interest rate determination methods, adjustment methods and interest charging methods, the relevant national provisions
shall prevail.
1.4.5 Where there is any adjustment
of interest rate mentioned above, Party A may not give a notice to Party B additionally.
1.5 The expiry date of interest shall
be the 20th day of each month. Party B shall pay interest by ( ) month (√ ) quarter ( ) year ( ) others__ /_
. The maturity date of the loan shall be the last expiry date of interest, clearing with the principal and interests.
Article 2 Payment of the Loan
2.1 Party A shall, prior to payment
of the loan, have the right to review the following items and decide whether to pay the loan according to the review results:
(1) whether Party B has handled and
completed all the legal formalities for government licensing, approval, registration and delivery in connection with the loan hereunder
in accordance with relevant laws and regulations(if any);
(2) whether the related guarantee contract
is effective (if any);
(3) whether Party B has fully paid the
expenses in connection with the execution of this Contract (if any);
(4) whether Party B has met the conditions
for loans specified in this Contract;
(5) whether there is any adverse change
to the business and financial conditions of Party B and the guarantor (if any);
(6) whether there is any change to Party
B’s repayment willingness and the guarantor’s guarantee willingness (if any);
(7) whether Party B has any breach of
contract hereunder.
2.2 If Party A discovers during the
payment process of the loan, that Party B’s credit status declines, main business profitability is not strong or there is
any abnormal situation during use of the loan money, Party A shall have the right to change the loan payment method or stop payment
of the loan money.
2.3 If, before the payment of the loan,
Party A is unable to pay the loan under this Contract due to change of national macro-control policies, or request for control
of credit scale or credit orientation present by Party A’s regulatory department to Party A, or due to other causes not attributable
to Party A, Party A shall have the right to stop payment of the loan or cancel this Contract, to which Party B shall have no objection.
2.4 Payment method
Party A and Party B agree to take the
following method for payment of the loan money:
( ) Payment in full by Party A upon
authorization: Party A pays the loan money through Party B’s account to Party B's transaction objects which are compliant
with the agreed purpose according to Party B’s application for money withdrawal and payment authorization.
( ) Payment in part by Party A upon
authorization: if the transaction objects are specific and the single payment amount is more than RMB _____ Yuan ( _____
Yuan included), Party A pays the loan money through Party B’s account to Party B's transaction objects which are compliant
with the agreed purpose according to Party B’s application for money withdrawal and payment authorization; Party A pays
the remaining loan money to Party B’s account according to Party B’s application for money withdrawal and Party B
himself pays the money to his transaction objects which are compliant with the agreed purpose.
( ) Payment in full by Party B himself:
Party A directly releases the loan money to Party B’s account according to Party B’s application for money withdrawal
and Party B himself pays the money to his transaction objects which are compliant with the agreed purpose.
2.5 Payment management
Party A and Party B agree to make the
following management on payment of the loan money:
If the method of payment upon authorization,
Party B may demand Party A to pay the loan money when Party B meets the following conditions for payment:
(1) Party B has submitted a repayment
application and relevant supporting materials, including business contract according to Party A’s requirements, and the information
about the transaction objects and payment amount, etc. listed in the payment application complies with that indicated in the supporting
materials;
(2) The payment application complies
with the loan purpose specified in this Contract;
(3) Party B authorizes Party A to pay
the loam money to specified transaction objects;
Party A shall have the right to check
whether the information about the transaction objects and payment amount, etc. listed in the payment application provided by Party
B complies with that indicated in relevant supporting materials, including business contract, and shall have the right to refuse
the payment application which does not comply with the loan purpose specified in this Contract.
If the method of payment by Party B
himself is adopted, after payment of the loan, Party B shall give a written summary and notice to Party A to report the payment
situation of the loan money by month, and provide the information about the transaction objects and payment amount, etc. and the
relevant supporting materials including business contract according to Party A’s requirements. Party A shall have the right
to check whether payment of the loan money complies with the agreed purpose through account analysis, examination of vouchers and
site investigation, and Party B shall provide coordination.
2.6 Conditions for change and sudden
change of payment method
Under any one of the following circumstances,
Party A shall have the right to adjust the standard of amount paid upon authorization or change the payment method to payment in
full upon authorization:
(1) If the method of payment by Party
B himself is adopted, and Party B fails to give a written summary and notice to Party A to report the payment situation of the
loan money according to the stipulations or refuses to provide coordination for Party A for checking whether independent payment
of the loan complies with the specified purpose through account analysis, examination of vouchers or site investigation;
(2) Party B violates this Contract and
evades payment by Party A upon authorization through breaking up the whole into parts;
(3) Party B’s credit status declines
and its main business profitability is not strong;
(4) There is abnormal situation in the
use of the loan money;
(5) The regulatory department adjusts
the standard of payment upon authorization.
2.7 Account management
Through consultation between Party A
and Party B, Party B agrees to open the following account with Party A to accept Party A’s monitoring:
1. Party B agrees to open a loan payment
account with Party A according to Party A’s requirements. Account name: SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD.;
account No.:_________________________ Payment and withdrawal of the loan money shall be handled through this account. Party A shall have the right to
carry out dynamic monitoring of this account. Where there is any abnormal situation detected, Party A shall have the right to
take relevant actions, including but not limited to freezing and stop payment, etc.
2. Party B agrees to open a capital
return account with Party A according to Party A’s requirements (please express with “√" in the ( ) in front
of the option)
( ) The capital return account is the
same as the loan payment account as set forth in sub-clause 1 of this Article.
( ) Capital return account name: _______________________________;
account No.: ______________________ .
Capital return in this account shall
comply with the following provisions: __________________________________
If Party B fails to timely repay Party
A the loan, Party A shall have the right to deduct money for repaying the loan principal and interest from the capital return account
opened by Party B with Party A and from other accounts opened by Party B with Party A and Party A’s subordinate branches.
3. Party B agrees that Party A is entitled
to take back the loan in advance according to the capital return situations of Party B.
Article 3 Repayment
3.1 Party B shall repay the loan principal
according to the following (2):
(1) Repayment of principal in installment:
( ) Repayment of principal by ( ) month
( ) quarter ( ) year. The amount repayable each period is ___/___ .
( ) Repayment of principal in installment
according to the date and amount of repayment listed in Annex 1 of this Contract.
( ) Others ________________/________________ .
(2) Repayment of principal in a lump
sum at maturity.
3.2 If Party B repays the loan principal
by month, the date of repayment of principal shall be the expiry date of interest each month after the loan is released; if Party
B repays principal by quarter, the date of repayment of principal shall be the expiry date of interest every three months after
the loan is released; if by year, the date of repayment of principal shall be the expiry date of interest every twelve months after
the loan is released.
3.3 Party B shall open an account in
Party A and deposit the amount repayable to this account prior to the specified date of repayment.
3.4 Party B shall repay the loan principal
and interest under this Contract on time and in full. If Party B fails to repay loan money in any period on time and in full, Party
A shall have the right to demand Party B to repay the total loan and charge default interest for the loan not repaid from the date
of overdue.
3.5 Party B hereby irrevocably authorizes
Party A to deduct loan principal and interest due and related expenses from any account opened by Party B in any banking branch
of Pingan Bank.
3.6 Should Party B make repayment in
advance, Party B shall present a written application to Party A thirty (30) days in advance and obtain Party A’s written
consent. The written application for early repayment shall be deemed irrevocable upon Party A’s written consent.
( ) If Party B makes repayment in advance,
Party B shall pay Party A compensation. Party B shall pay such compensation while Party B pays Party A the loan principal and interest
payable in advance. The amount of compensation shall be calculated according to the amount of prepayment × number of days
prepaid × interest rate specified in this Contract. If Party B prepays the loan for less than thirty (30) days in advance,
compensation shall be calculated according to the actual days and half shall be charged; if for more than thirty (30) days, compensation
shall be calculated according to thirty (30) days.
Article 4 Party B’s Representations
and Warranties
4.1 Party B is a company with good reputation
duly established and validly existing within the jurisdiction of the location where it is located. Party B has all corporate rights
and has obtained the government license and approval for conducting its current business.
4.2 Party B has completed all the authorizations
and approvals necessary for the signature of this Contract. This Contract is the presentation of Party B’s true meaning and
may not result in violation of any agreement or commitment concluded with any a third party. When this Contract is concluded and
signed, Party B has not violate any law, regulation and rule for environmental protection, energy conservation and emission reduction,
and pollution reduction, and Party B promises to strictly abide by such laws, regulations and rules after the conclusion of this
Contract.
4.3 Party B is not involved in any litigation,
arbitration execution, appeal and reconsideration procedure and other incident or case which may have major adverse impact on the
execution of this Contract, unless otherwise Party B notified Party A in wiring prior to the conclusion of this Contract.
4.4 Party B shall, within the time limit
requested by Party A, provide its financial statements, number of all opening accounts, loan balance and other relevant materials
requested by Party A. Party B shall ensure the genuine, completeness and objectivity of all the documents and materials provided,
which shall have no false record, misleading representation or material misstatement. The financial statements shall be prepared
strictly in accordance with the Accounting Standards of China.
Article 5 Party B’s Rights and
Obligations
5.1 Party B shall have the right to
demand Party A to pay Party B the loan according to the conditions specified in this Contract. However, if Party A is unable to
pay the loan under this Contract due to change of national macro-control policies, or request for control of credit scale or credit
orientation present by Party A’s regulatory department to Party A, or due to other causes not attributable to Party A, Party
A shall have the right to stop payment of the loan or cancel this Contract.
5.2 Party B shall use the loan according
to the purpose specified in this Contract and repay the loan principal and interest on time and in full. 5.3 Party B shall open
an account in Party A and handle deposit, settlement and other related services firstly in Party A.
5.4 If Party B is a customer
group, it shall give a written report to Party A within ten days after the date of affiliated transaction of over 10% of net
assets. The report contents shall include the affiliated relation between the transaction parties, transaction item and
nature, transaction amount or relevant proportion, and the pricing policy (including no-money involved transaction or only
symbolic-money involved transaction).
A customer group as mentioned herein
shall mean an enterprise or public institution legal person who has the following features:
(1) It directly or indirectly controls
or is directly or indirectly controlled by another enterprise or public institution legal person in respect of stock right or management;
(2) It is jointly controlled by a third
party enterprise or public institution legal person;
(3) Its principal individual investor,
key manager or a close family member (including lineal blood relationship within three generations and collateral blood relationship
within two generations) commonly directly or indirectly controls;
(4) It has other affiliated relationship
and may transfer the assets and profits not on the basis of fair price, which should be deemed as credit management by a customer
group.
5.5 If Party B has any one of the following
circumstances, it shall notify Party A thirty days in advance. If Party A thinks it will cause significant impact on the performance
of the Contract, Party B shall obtain Party A’s written consent in advance:
(1) material change to Party B’s
operating system, equity structure, property organizational form and primary business, including but not limited to implementation
of contracting, lease, joint operation, reform of shareholding system, merger, acquisition, joint venture (cooperation), division,
establishment of a subsidiary, trusteeship (takeover), sales of enterprise, transfer of property rights and reduction of capital,
etc.;
(2) disposal of important assets, of
which the value exceeds 10% of the net assets, by selling, gifting, lending, transferring, mortgaging (pledging) or other means;
(3) its dividends exceed 30% of the
net profits after tax of the current year or exceed 20% of the total undistributed profits;
(4) it adds external investment of over
20% of its net assets after the credit line becomes valid;
(5) it changes the debt clauses with
other bank and pay off other long-term debt in advance;
(6) Party B repays its shareholder debt;
or
(7) it applies other bank for a credit
line, or provides a third party with security, or reduces or exempts a third party’s debt, with the debt amount concerned
exceeding 20% of its net assets.
5.6 Party B shall notify Party A within
seven working days as of the date of occurrence or possible occurrence of the following matters, and Party A shall have the right
to decide whether to request Party B to add guaranty or directly take back all the loans as the case may be:
(1) Party B or the guarantor’s
business or financial status is worsened, or there is significant financial loss, loss of assets (including but not limited to
loss of assets caused due to external guarantee) or other financial crisis;
(2) Party B encounters administrative
punishment or criminal sanction or is involved in any significant legal dispute due to its illegal business behavior;
(3) Party B, its shareholder or de facto
controlling person, or the legal representative or key manager of the guarantor is involved in an important case, or its main asset
goes under property preservation or other compulsory measures, or encounters administrative punishment or criminal sanction, or
there is any other incident which causes Party B impossible to perform its duties normally;
(4) Party B or the guarantor provides
a third party with guarantee, causing significant adverse impact on its financial condition or on the performance of its obligations
under this Contract;
(5) Party B or the guarantor has the
following changes, such as division, consolidation, major merger, acquisition and reconstruction, disposal of major assets, reduction
of capital, winding-up, cease of business for rectification, liquidation, reorganization, being revoked, being dissolved, bankruptcy,
or its business license is revoked;
(6) there is obvious reduction or loss
of the guaranty value, or dispute about the ownership of the guaranty; or the guaranty is sealed up, detained, frozen, deducted,
detained or sold by auction; or
(7) any other important event or default
event which may affect the business activities of Party B or the guarantor and the loan safety of Party A.
5.7 If Party B changes its domicile,
mailing address, telephone number, business scope, legal representative or other relevant items, it shall notify Party A in writing
within seven working days after the change. In the event that Party B fails to perform the said notification obligation, the notices
and documents given by Party A according to the original mailing address shall be deemed to have been served.
5.8 Party B shall keep reasonable financial
ratios within the loan term.
( ) The financial indicators shall reach
the following standard within the loan term:
Article 6 Party A’s Rights and
Obligations
6.1 Party A shall have the right to
take back the debt principal and interest (including compound interest, and default interest for overdue and appropriation) and
charge the expenses payable by Party A, and shall be entitled to deduct the said principal, interest and expenses directly from
Party B’s account.
6.2 From the second year after the effectiveness
of a over one-year (excluding one-year) loan, Party A shall have the right to evaluate the business and financial conditions of
Party B and the guarantor and the specific project progress according to the conditions for loans specified in this Contract when
the loan is released, and adjust the loan amount, term and interest rate according to the evaluation result.
Where there is any mortgaged (pledged)
property, Party A shall have the right to ask for reevaluating the mortgaged (pledged) property by an appraisal agency accepted
by Party A each year. If the value of the mortgaged (pledged) property is declined obviously and is not enough for guaranteeing
the debt under the Main Contract, Party A shall have the right to ask Party B to repay part of the loan or provide other guarantee
measures accepted by Party A.
6.3 Party A shall have the right to
ask Party B to provide materials related to the loan, enter Party B’s business site, investigate, review and check the use
of the credit line and the assets, financial and business conditions of Party B, for which Party B shall provide coordination.
Party A shall also have the right to supervise Party B to use the loan for the purpose specified herein.
6.4 Party A shall bear confidentiality
obligation for the materials provided by Party B, except otherwise prescribed by laws and regulations, or specified by a regulatory
authority or by both Parties, or non-confidential information provided by Party B.
Article 7 Breach of Contract
7.1 Any one of the following cases shall
be deemed as a default event referred to herein:
(1) Party B fails to use the loan money
according to the method specified herein or evades payment upon authorization as set forth in sub-clause 2.5 of this Contract through
breaking up the whole into parts;
(2) There is overdue interest, overdue
repayment or advance of the credit hereunder, or the credit funds are used not for the purpose specified by both Parties;
(3) Party B violates some of its representations,
warranties and commitments;
(4) Party B violates some of its obligations
performable hereunder;
(5) Party B conceals some genuine important
information;
(6) Party B or the guarantor evades
bank claims through affiliated transactions or by other means;
(7) Party B or the guarantor has any
one of the following behaviors, being negligent in managing and claiming the creditor’s rights due, or disposing and transferring
its main properties free of charge, or at unreasonable low price or by other improper means, or escaping debts;
(8) Party B illegally get funds or credit
from Party A or other banks by using a false contract and arrangement with a third party, including but not limited to pledge or
discount of the notes receivable and other claims without actual trading background.
(9) Party B or the guarantor violates
any other contract (including but not limited to credit contract, loan contract and guarantee contract) signed with Party A or
other banks or any securities with the nature of debt it issued;
(10) Party B’s guarantor violates
the guarantee contract (including but not limited to guarantee contract, mortgage contract and pledge contract) or has any breach
of the guarantee contract, or the guarantee contract has not taken effect, is invalid or is cancelled; or there is obvious reduction
or loss of the guaranty value, or dispute about the ownership of the guaranty, or the guaranty is sealed up, detained, frozen,
deducted, detained or sold by auction; or
(11) There is any case which should
be notified under sub-clauses 5.5 and 5.6 herein that Party A thinks effective on the safety of its creditor’s rights.
7.2 In case of any one of these default
events listed in the preceding clause, Party A shall have the right to take the following actions:
(1) To stop or terminate the release
of any loan money not released under this Contract;
(2) To announce acceleration of maturity
of the credit line; to ask Party B to repay part or all the credit principal, interest and expenses immediately, and pay default
interest for the total credit principal released at the default interest rate from the date of occurrence of the default event
until Party B pays off the total credit principal;
Expenses shall include but not be limited
to the attorney fee, legal cost, arbitration fee, traveling expenses, announcement cost, service fee, execution fee, transfer fee
and other relevant expenses of Party A for realizing its creditor’s rights.
(3) To ask Party B to provide new guarantee
measures accepted by Party A;
(4) To adjust the loan amount, term
and interest rate according to the conditions of loan risks, and change the loan payment method to payment upon authorization;
(5) To make deduction directly from
the account of Party B and the guarantor to repay all the debts under this Contract and the specific business contract (including
the debts Party A requests for prepayment), without obtaining Party B’s consent in advance;
(6) To exercise the guarantee right,
ask the guarantor to perform guarantee liability, or realize creditor’s rights through disposal of the mortgaged property
and/or pledged property;
(7) If Party B fails to repay the loan
according to the stipulations when the loan is matured or is matured earlier, Party A shall have the right to charge additional
50% of the interest rate specified herein as default interest for the loan principal from the date of overdue according to the
actual days of overdue. If Party B fails to use the loan according to the specified purpose, from the date when Party B uses the
loan in violation of this Contract, Party A shall have the right to charge additional 100% of the interest rate specified herein
as default interest for the loan amount which is appropriated.
In case of any interest which cannot
be paid on time, compound interest shall be charged according to the default interest rate. Meanwhile, default interest and compound
interest shall be recharged for delayed and appropriated loans.
If the loan is delayed for less than
ninety (90) days (including ninety (90) days), the priority for repayment of the loan principal and interest is as follows: (1)
costs and expenses; (2) interest (including default interest and compound interest); (3) principal. If the loan is delayed for
more than ninety (90) days, the priority for repayment of the loan principal and interest is as follows: (1) costs and expenses;
(2) principal; (3) interest (including default interest and compound interest).
(8) Party A claims Party B’s debtor
for the right of subrogation or appeal to the court to revoke Party B’s waiving of the creditor’s right due or Party
B's transfer of property free of charge or at an obviously unreasonable low price. Party B shall provide all necessary coordination
and assistance according to Party A’s requirements, and all the costs and expenses caused to Party A arising therefrom shall
be borne by Party B; or
(9) Other remedial measures prescribed
by laws and regulations and specified in the Contract.
Article 8 Other Provisions
Article 9 Supplementary Provisions
9.1 If the credit line under this Contract
belongs to the line under the Line Contract, the guarantee method under the Line Contract shall also be applicable. 9.2 ( ) Both
Parties agree to handle compulsory enforcement notarization for this Contract.
If Party B fails to completely pr partly
perform the obligations specified herein when compulsory enforcement notarization is handled by both Parties for this Contract,
Party A shall have the right to apply the original notary public for an enforcement certificate, and apply the competent people’s
court (the people’s court at the location where the person subject to enforcement lives or where the property of the person
subject to enforcement is located) for enforcement holding the original notarial certificate and the enforcement certificate.
(√) No compulsory enforcement
notarization shall be handled for this Contract.
9.3 The application for single credit,
credit contract, receipt for a loan and credit vouchers related hereto, other relevant documents and materials confirmed by both
Parties, and the commitment letter and declaration issued by Party B unilaterally to Party A shall be deemed as an integral part
of this Contract and shall have the same equal legal force as this Contract.
9.4 Party B hereby agrees and authorizes
Party A to, during Party B’s credit business application period and the business duration period, inquire Party B’s
credit information which has been entered into the financial credit information database and other credit agencies established
legally. for Party B's credit business application and follow-up management. Party B hereby agrees and authorizes Party A to, according
to the provisions of the Regulations on Administration of Credit Information Industry, report Party B’s enterprise
information and credit information, including but not limited to credit information and the information constituting adverse impact
on the credit status of the information agents, to the financial credit information database and other credit agencies established
legally.
9.5 Please confirm the options with
√ in the brackets before the selected items.
9.6 Any and all disputes arising from
the execution of the Contract shall be settled by both Parties through consultation. Where consultation fails, the following (2)
shall be adopted for dispute settlement:
(1) To apply ______/__________
for arbitration in accordance with the current arbitration rules of the commission. The award of the arbitration shall be final
and binding upon both Parties.
(2) To initiate a lawsuit in the people’s
court at the location where Party A is located;
(3) To initiate a lawsuit in the people's
court of _____/_____ .
9.7 This Contract shall be governed
by the laws of the People's Republic of China.
9.8 This Contract shall come into force
upon the signature of all the parties hereto (signed or sealed by the authorized signatories and affixed with official seal). If
the loan hereunder is actually not released within three months as of the date of effectiveness of this Contract, Party A shall
have the right to cancel this Contract unilaterally.
9.9 This Contract shall be made out
in three (3) originals for Party A holding two (2) and Party B, ( ) the guarantor and ( ) the registration authority each
holding one (1).
Party B hereby represents that it has
fully understood all the terms and conditions of this Contract (especially the bold fonts), and the clauses of the related guarantee
contract and other relevant documents and has taken independent legal consultation (where necessary).
Annex 1:
Loan Principal Repayment Schedule
Time |
Date of repayment |
Amount of repayment (in words) |
1 |
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2 |
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3 |
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4 |
|
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5 |
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6 |
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7 |
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8 |
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9 |
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10 |
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Party A (Seal): PINGAN BANK CO., LTD. SHENZHEN XINZHOU
BRANCH (Seal)
Legal Representative (Principal) or Authorized Agent (Signature):
Yao Guiping(Seal)
Date of Signature: Oct. 20, 2014
Party B (Seal): SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD.
(Seal)
Legal Representative (Principal) or Authorized Agent (Signature):
Pan Dangyu (Seal)
Date of Signature: Oct. 20, 2014
Exhibit 10.3(b)
Maximum Guarantee Contract
Contract No.: pingyinshenxinzhouebaozi 20141020
No. 003
Party A (Creditor): PINGAN BANK CO.,
LTD. SHENZHEN BRANCH
Address: NO1099 shennanzhonglu
road, shenzhen
Tel.: 23480048
Fax: 23480054
Principal: Yao Guiping
Position: President
Party B (Guarantor): Pan Dangyu
Certificate Type *:ID Certificate No. *:430104196803184316
(The contents expressed with “*”
may not be written if Party B is an unit)
Address: |
Tel.: |
Fax: |
Legal Representative **: |
Position **: |
(The contents expressed with “**”
may not be written if Party B is an individual)
Whereas Party B is willing to act as the
Guarantor of Party A and provide Party A with maximum joint liability guarantee in order to ensure the execution of the contract
between Party A and SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD. (hereinafter referred to as the Debtor), IN WITNESS WHEREOF,
Party A and Party B hereby agree to conclude and sign this Contract upon consensus through consultation between both Parties. Both
Parties shall abide by the following terms and conditions.
Article 1 Guarantee and Guarantee Liability
1.1 Scope of guarantee
The scope of guarantee hereunder is as
follows (expressed with “√” in front of the option):
(√) The
principal, interest, compound interest and default interest of all the debts (including contingent debts), and the expenses for
realizing the creditor’s rights which shall be borne by the Debtor under the Comprehensive Credit Line Contract of
pingyinshenxinzhouzongzi 20141020 No. 001 (hereinafter referred to as “the Main Contract”). The maximum principal
(balance) of the debts shall be (converted into) RMB (currency) (in words) seventy million Yuan only.
( ) (Converted into) (currency) (in words)
of the principal of all the debts (including contingent debts) (converted into) (currency) (in words) , and the corresponding interest,
compound interest and default interest, and the expenses for realizing the creditor’s rights which shall be borne by the
Debtor under the Contract of PY No. (hereinafter referred to as “the Main Contract”). Party A shall
have the right to ask Party B to bear guarantee liability for the debt balance within the aforesaid scope of guarantee as long
as the debts under the Main Contract are not fully repaid.
( ) Performance of the debts under all
the credit line contracts and specific credit business contracts (hereinafter referred to as “the Main Contract”) concluded
and signed by and between the Debtor and Party A dated from YYYY MM DD to YYYY MM DD. The date of signature of the Main
Contract shall be within this period and the execution period of the Main Contract is not limited to this period. The scope of
Party B’s maximum guarantee shall include the principal, interest, compound interest and default interest of all the debts
(including contingent debts), and the expenses for realizing the creditor’s rights which shall be borne by the Debtor under
the Main Contract. The maximum principal (balance) of the said debts shall be (converted into) (currency) (in words) .
( ) The principal of the debts not fully
repaid by the Debtor (converted into) (currency) (in words) , and the interest, compound interest and default interest thereof,
and the expenses for realizing the creditor’s rights under the Contract of PY No. (hereinafter referred to
as “the Main Contract”).
( )
Interest, default interest and compound
interest shall be calculated according to the stipulations of the Main Contract until the debts are fully repaid. The expenses
for realizing the creditor’s rights shall include but not be limited to announcement cost, delivery fee, appraisal fee, attorney
fee, legal cost, traveling expenses, evaluation fee, auction fee, property preservation cost and enforcement fee.
The exchange rate of currencies other than
RMB shall be converted according to the foreign exchange rate published by Party A when the specific business occurs.
1.2 Guarantee period of this Contract:
(√) The guarantee period hereunder
shall be from the date of effectiveness of this Contract to two years after the expiration of the debt performance term specified
in the Main Contract. The guarantee period of each specific credit business shall be calculated separately. In case of extension
of any specific credit, the guarantee period shall be extended to two years after the expiration of the extended term.
( ) The guarantee period
hereunder shall be from the date of release of the loan under the Main Contract to the date when handles and completes the procedures
for real estate mortgage registration taking Party A as the mortgagee and the relevant ownership certificates are submitted to
Party A.
( ) The guarantee
period hereunder shall be from the date of effectiveness of this Contract to
(
)
If Party A transfers its creditor’s
rights to a third person by law during the guarantee period, Party B hereby agrees to bear guarantee liability within the original
scope of guarantee.
1.3 If the Debtor transfers its credit
line granted by Party A to a third party to use, Party B hereby agrees to bear guarantee liability for the transferred part according
to the stipulations of this Contract. The specific credit-transferred object and amount are as follows:
1.
(the transferee), amount: (converted into) (currency)
(in words) ;
2.
(the transferee), amount: (converted into) (currency)
(in words) ;
3.
(the transferee), amount: (converted into) (currency)
(in words) ;
4.
1.4 Party B shall bear guarantee liability
hereunder independently. Party A shall have the priority to ask Party B to bear guarantee liability no matter whether there is
any security or guarantee provided by the guarantor (including the debtor of the Main Contract). If Party A waives the guarantee
right for the guaranteed property (including the guaranteed property provided by the Debtor) or for other guarantors, Party B shall
also take full guarantee liability according to the stipulations of this Contract.
1.5 This Contract is an irrevocable
contract.
1.6 The validity of this Contract is
independent from the Main Contract. In case of invalidity of the Main Contract or any clause of the Main Contract, this Contract
shall remain in force.
Article 2 Performance of Guarantee Liability
2.1 If the Debtor fails to perform any matured
debt (including matured in advance, same below) under the Main Contract, Party B ensures to repay the debt unconditionally after
the receiving of a written payment notice from Party A. Any document about the Debtor’s failure to perform any matured debt
given by Party A shall be deemed as a written payment notice that Party A asks Party B to make payment.
2.2 Party B hereby irrevocably authorizes
Party A to deduct the principal and interest of the Debtor’s matured debt and related expenses directly from any and all
accounts opened by Party B in any banking branch of Pingan Bank. Party A shall notify Party B in writing after this deduction and
shall have the right to continuously claim Party B for the insufficient part. If the amount deducted is not enough to repay
all the matured debts and the Debtor delays for less than 90 days (including 90 days), the repayment priority of principal and
interest is as follows: (1) expenses; (2) interest (including default interest and compound interest); (3) principal. If the Debtor
delays for more than 90 days, the repayment priority of the principal and interest of the advance payment is as follows: (1) expenses;
(2) principal; (3) interest (including default interest and compound interest).
Article 3 Guarantor’s Warranties
and Commitments
3.1 Party B has completed all the authorizations
and approvals necessary for the signature of this Contract. This Contract is the presentation of Party B’s true meaning and
may not result in violation of any agreement or commitment concluded with any a third party. When this Contract is concluded and
signed, Party B has not violate any law, regulation and rule for environmental protection, energy conservation and emission reduction,
and pollution reduction, and Party B promises to strictly abide by such laws, regulations and rules after the conclusion of this
Contract.
3.2 Party B is not involved in any litigation,
arbitration, execution, appeal and reconsideration procedure and other incident or case which may have major adverse impact on
the execution of this Contract, unless otherwise Party B notified Party A in wiring prior to the conclusion of this Contract.
3.3 The following provisions are applicable
if Party B is a legal person:
3.3.1 Party B is a company with good reputation
duly established and validly existing within the jurisdiction of the location where it is located. Party B has all corporate rights
and has obtained the government license and approval for conducting its current business.
3.3.2 Party B shall, within the time limit
requested by Party A, provide its financial statements, number of all opening accounts, loan balance and other relevant materials
requested by Party A. Party B shall ensure the genuine, completeness and objectivity of all the documents and materials provided,
which shall have no false record, misleading representation or material misstatement. The financial statements shall be prepared
strictly in accordance with the Accounting Standards of China.
3.4 The following provisions are applicable
if Party B is an individual:
3.4.1 Party B has provided his personal
and family incomes and properties, and other relevant materials required by Party A, and Party B warrants the genuine, completeness
and accuracy of the documents and materials that Party B has provided.
3.4.2 Party B warrants coordinating Party
A to supervise and inspect the incomes and credit conditions of Party B. If Party A thinks the loan guarantee conditions worsened
during the execution period of this Contract, Party B shall provide other guarantee measures accepted by Party A.
Article 4 Guarantor’s Rights and
Obligations
4.1 Party B shall have the right to ask Party
A to bear confidentiality obligation for the materials provided by Party B, except otherwise prescribed by laws and regulations,
or specified by a regulatory authority or by both Parties, or non-confidential information provided by Party B.
4.2 Party B has carefully read the Main
Contract and confirmed all the clauses of the Main Contract. Party B may not confirm the single credit contract or IOU or other
credit business voucher under the Main Contract which does not exceed the specification of the Main Contract.
Party A and the Debtor may not obtain
Party B’s consent for change of the Main Contract. Party B shall continuously bear joint guarantee liability for the Main
Contract after change. However, if the principal of the debit is increased and the loan term is extended without Party B’s
written consent, Party B shall continuously bear guarantee liability according to the amount and term originally specified in the
Main Contract.
4.3 Party B shall accept and ensure to
coordinate Party A to supervise and inspection Party B’s management situations and guarantee capacity. Party B shall allow
Party A to enter Party B’s business site for inspecting Party B’s assets, financial status and management situations.
4.4 ( ) In case of transfer of major property
rights, system change or transfer of claims and debts occurring to Party B, Party B shall notify Party A of the relevant issues
in advance and obtain Party A’s written consent prior to such change.
( ) If Party B has any one of the following
circumstances, it shall notify Party A thirty days in advance. If Party A thinks it will cause significant impact on the performance
of the Contract, Party B shall obtain Party A’s written consent in advance:
(1) material change to Party B’s
operating system, equity structure, property organizational form and primary business, including but not limited to implementation
of contracting, lease, joint operation, reform of shareholding system, merger, acquisition, joint venture (cooperation), division,
establishment of a subsidiary, trusteeship (takeover), sales of enterprise, transfer of property rights and reduction of capital,
etc.;
(2) disposal of important assets, of which
the value exceeds 10% of the net assets, by selling, gifting, lending, transferring, mortgaging (pledging) or other means;
(3) its dividends exceed 30% of the net
profits after tax of the current year or exceed 20% of the total undistributed profits;
(4) it adds external investment of over
20% of its net assets after the Contract becomes valid;
(5) it changes the debt clauses with other
bank and pay off other long-term debt in advance;
(6) Party B repays its shareholder debt;
or
(7) it applies other bank for a credit
line, or provides a third party with security, or reduces or exempts a third party’s debt, with the debt amount concerned
exceeding 20% of its net assets.
4.5 Party B shall notify Party A within
seven working days as of the date of occurrence or possible occurrence of the following matters, and Party A shall have the right
to decide whether to request Party B and the Debtor to add guaranty or directly take back all the loans as the case may be:
(1) business or financial status is worsened;
(2) Party B is highly fined by a competent
authority or is involved in major legal dispute;
(3) Party B, its shareholder, its legal
representative or key manager is involved in an important case, or Party B’s main asset goes under property preservation
or other compulsory measures; or there is any other incident which causes Party B’s legal representative or key manager impossible
to perform his duties normally;
(4) Party B provides a third party with
guarantee, causing significant adverse impact on its financial condition or on the performance of its obligations under this Contract;
(5) Party B goes into winding-up, ceasing
of its operation for reorganization, dissolution, closedown or bankruptcy, or its business license is revoked;
(6) its economic conditions become bad,
such as unemployment, unit bankruptcy, or major loss of personal property, major adverse change of personal physical health, divorce
with spouse, and other matters which may affect Party B’s capacity to perform this Contract; or
(7) any other important event or default
event which may affect the business activities of Party B and the loan safety of Party A.
4.6 If Party B changes its domicile, mailing
address, telephone number, business scope, legal representative (work unit) or other relevant items, it shall notify Party A in
writing within seven working days after the change. In the event that Party B fails to perform the said notification obligation,
the notices and documents given by Party A according to the original mailing address shall be deemed to have been served.
4.7 ( ) Party B shall keep reasonable financial
ratios within the loan term.
( ) The financial indicators shall reach
the following standard within the loan term:
Article 5 Breach of Contract
5.1 Any one
of the following cases shall be deemed as a default event referred to herein:
(1) Party B fails to perform the compensative
liability on time and in full;
(2) Party B violates some of its warranties
and commitments or has any other behavior not performing the obligations hereunder;
(3) Party B transfers its property or draws
out capital;
(4) Party B has breach of contract under
other contracts signed and concluded with Party A or any other banks; or
(5) there is any major adverse change of
Party B’s business and financial status.
5.2 In case of any one of these default
events listed in the preceding clause, Party A shall have the right to take the following actions:
(l) To ask Party B to perform the compensative
liability immediately;
(2) To ask Party B to provide new guarantee
measures accepted by Party A;
(3) Party A claims Party B’s debtor
for the right of subrogation or appeal to the court to revoke Party B’s waiving of the creditor’s right due or Party
B's transfer of property free of charge or at an obviously unreasonable low price. Party B shall provide all necessary coordination
and assistance according to Party A’s requirements, and all the costs and expenses caused to Party A arising therefrom shall
be borne by Party B; or
(3) Other remedial measures prescribed
by laws and regulations.
Article 6 Other Provisions
( ) The Bank Enterprise Guarantee Business
Cooperation Agreement (hereinafter referred to as the Agreement) concluded and signed by and between Party A and Party B is
a fundamental legal document for standardizing the relation of rights and obligations between both Parties. In case of any discrepancy
between this Contract and the Agreement, the Agreement shall prevail.
Chapter 7 Supplementary Provisions
7.1 ( ) Both Parties agree to handle compulsory
enforcement notarization for this Contract.
If Party B fails to completely or partly
perform the obligations specified herein when compulsory enforcement notarization is handled by both Parties for this Contract,
Party A shall have the right to apply the original notary public for an enforcement certificate, and apply the competent people’s
court (the people’s court at the location where the person subject to enforcement lives or where the property of the person
subject to enforcement is located) for enforcement holding the original notarial certificate and the enforcement certificate.
(√) No compulsory enforcement notarization
shall be handled for this Contract.
7.2 Party B authorizes Party A to inquire
Party B’s credit standing including information about social insurance from the credit information database of the People’s
Bank of China, the credit database established upon approval by the competent credit investigation authorities, or relevant institutions,
departments and individuals. The credit report acquired through inquiry may be used only within the scope prescribed by the interim
measures for administration of credit information database issued by the People’s Bank of China and other relevant laws and
regulations. As agreed by Party B, Party A may provide Party B’s credit information for the credit information database of
the People’s Bank of China and the credit database established upon approval by the competent credit investigation authorities.
7.3 Please confirm the options with √
in the brackets before the selected items.
7.4 Any and all disputes arising from the
execution of the Contract shall be settled by both Parties through consultation. Where consultation fails, the following (2)
shall be adopted for dispute settlement:
(1) To apply
/ for arbitration in accordance with the
current arbitration rules of the commission. The award of the arbitration shall be final and binding upon both Parties.
(2) To initiate a lawsuit in the people’s
court at the location where Party A is located;
(3) To initiate a lawsuit in the people's
court of / .
7.5 This Contract shall be governed by
the laws of the People's Republic of China.
7.6 This Contract shall come into force
upon the signature of all the parties hereto (if one party is a natural person, the Contract shall be signed by the party; if one
party is a legal person or other organization, the Contract shall be signed or sealed by the authorized signatory and affixed with
the official seal).
7.7 This Contract shall be made out in
three originals for Party A holding two and Party B, ( ) the Debtor and ( ) the registration authority each holding one.
Unit Seal of
Party A: PINGAN BANK CO., LTD. SHENZHEN BRANCH:
Signature of
Legal Representative or Authorized Agent:
Seal of
Party B (if an unit):
Signature
of Legal Representative or Authorized Agent:
Signature
of Party B (if an individual) In person: Dangyu Pan
or Authorized
Agent:
Exhibit 10.3(c)
Maximum Guarantee Contract
Contract No.: pingyinshenxinzhouebaozi 20141020
No. 002
Party A (Creditor): PINGAN BANK CO., LTD.
SHENZHEN BRANCH
Address: NO1099 shennanzhonglu road,
shenzhen
Tel.: 23480048
Fax: 23480054
Principal: Yao Guiping
Position: President
Party B (Guarantor): SPRINGPOWER TECHNOLOGY
(SHENZHEN) COMPANY LIMITED
Certificate Type *:
Certificate No. *:
(The contents expressed with “*”
may not be written if Party B is an unit)
Address: Building A, Chaoshun Industrial Zone,
Renmin Road, Guanlan
Tel.: |
Fax: |
|
|
Legal Representative**:Pan Dangyu |
Position **: |
(The contents expressed with “**”
may not be written if Party B is an individual)
Whereas Party B is willing to act as the Guarantor
of Party A and provide Party A with maximum joint liability guarantee in order to ensure the execution of the contract between
Party A and SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD. (hereinafter referred to as the Debtor), IN WITNESS WHEREOF, Party A
and Party B hereby agree to conclude and sign this Contract upon consensus through consultation between both Parties. Both Parties
shall abide by the following terms and conditions.
Article 1 Guarantee and Guarantee Liability
1.1 Scope of guarantee
The scope of guarantee hereunder is as follows
(expressed with “√” in front of the option):
(√) The principal, interest, compound
interest and default interest of all the debts (including contingent debts), and the expenses for realizing the creditor’s
rights which shall be borne by the Debtor under the Comprehensive Credit Line Contract of pingyinshenxinzhouzongzi 20141020
No. 001 (hereinafter referred to as “the Main Contract”). The maximum principal (balance) of the debts shall be
(converted into) RMB (currency) (in words) seventy million Yuan only.
( ) (Converted into) (currency) (in words)
of the principal of all the debts (including contingent debts) (converted into) (currency) (in words) , and the corresponding interest,
compound interest and default interest, and the expenses for realizing the creditor’s rights which shall be borne by the
Debtor under the Contract of PY No. (hereinafter referred to as “the Main Contract”). Party A shall
have the right to ask Party B to bear guarantee liability for the debt balance within the aforesaid scope of guarantee as long
as the debts under the Main Contract are not fully repaid.
( ) Performance of the debts under all the
credit line contracts and specific credit business contracts (hereinafter referred to as “the Main Contract”) concluded
and signed by and between the Debtor and Party A dated from YYYY MM DD to YYYY MM DD. The date of signature of the Main
Contract shall be within this period and the execution period of the Main Contract is not limited to this period. The scope of
Party B’s maximum guarantee shall include the principal, interest, compound interest and default interest of all the debts
(including contingent debts), and the expenses for realizing the creditor’s rights which shall be borne by the Debtor under
the Main Contract. The maximum principal (balance) of the said debts shall be (converted into) (currency) (in words) .
( ) The principal of the debts not fully repaid
by the Debtor (converted into) (currency) (in words) , and the interest, compound interest and default interest thereof, and the
expenses for realizing the creditor’s rights under the Contract of PY No. (hereinafter referred to as “the
Main Contract”).
( )
Interest, default interest and compound
interest shall be calculated according to the stipulations of the Main Contract until the debts are fully repaid. The expenses
for realizing the creditor’s rights shall include but not be limited to announcement cost, delivery fee, appraisal fee,
attorney fee, legal cost, traveling expenses, evaluation fee, auction fee, property preservation cost and enforcement fee.
The exchange rate of currencies other than
RMB shall be converted according to the foreign exchange rate published by Party A when the specific business occurs.
1.2 Guarantee period of this Contract:
(√) The guarantee period hereunder shall
be from the date of effectiveness of this Contract to two years after the expiration of the debt performance term specified in
the Main Contract. The guarantee period of each specific credit business shall be calculated separately. In case of extension of
any specific credit, the guarantee period shall be extended to two years after the expiration of the extended term.
( ) The guarantee period
hereunder shall be from the date of release of the loan under the Main Contract to the date when handles and completes the procedures
for real estate mortgage registration taking Party A as the mortgagee and the relevant ownership certificates are submitted to
Party A.
( ) The guarantee period
hereunder shall be from the date of effectiveness of this Contract to
(
)
If Party A transfers its creditor’s rights
to a third person by law during the guarantee period, Party B hereby agrees to bear guarantee liability within the original scope
of guarantee.
1.3 If the Debtor transfers its credit line
granted by Party A to a third party to use, Party B hereby agrees to bear guarantee liability for the transferred part according
to the stipulations of this Contract. The specific credit-transferred object and amount are as follows:
1.
(the transferee), amount: (converted into) (currency)
(in words) ;
2.
(the transferee), amount: (converted into) (currency)
(in words) ;
3.
(the transferee), amount: (converted into) (currency)
(in words) ;
4.
1.4 Party B shall bear guarantee liability
hereunder independently. Party A shall have the priority to ask Party B to bear guarantee liability no matter whether there is
any security or guarantee provided by the guarantor (including the debtor of the Main Contract). If Party A waives the guarantee
right for the guaranteed property (including the guaranteed property provided by the Debtor) or for other guarantors, Party B shall
also take full guarantee liability according to the stipulations of this Contract.
1.5 This Contract is an irrevocable contract.
1.6 The validity of this Contract is independent
from the Main Contract. In case of invalidity of the Main Contract or any clause of the Main Contract, this Contract shall remain
in force.
Article 2 Performance of Guarantee Liability
2.1 If the Debtor fails to perform any matured
debt (including matured in advance, same below) under the Main Contract, Party B ensures to repay the debt unconditionally after
the receiving of a written payment notice from Party A. Any document about the Debtor’s failure to perform any matured debt
given by Party A shall be deemed as a written payment notice that Party A asks Party B to make payment.
2.2 Party B hereby irrevocably authorizes
Party A to deduct the principal and interest of the Debtor’s matured debt and related expenses directly from any and all
accounts opened by Party B in any banking branch of Pingan Bank. Party A shall notify Party B in writing after this deduction and
shall have the right to continuously claim Party B for the insufficient part. If the amount deducted is not enough to repay
all the matured debts and the Debtor delays for less than 90 days (including 90 days), the repayment priority of principal and
interest is as follows: (1) expenses; (2) interest (including default interest and compound interest); (3) principal. If the Debtor
delays for more than 90 days, the repayment priority of the principal and interest of the advance payment is as follows: (1) expenses;
(2) principal; (3) interest (including default interest and compound interest).
Article 3 Guarantor’s Warranties and
Commitments
3.1 Party B has completed all the authorizations
and approvals necessary for the signature of this Contract. This Contract is the presentation of Party B’s true meaning and
may not result in violation of any agreement or commitment concluded with any a third party. When this Contract is concluded and
signed, Party B has not violate any law, regulation and rule for environmental protection, energy conservation and emission reduction,
and pollution reduction, and Party B promises to strictly abide by such laws, regulations and rules after the conclusion of this
Contract.
3.2 Party B is not involved in any litigation,
arbitration, execution, appeal and reconsideration procedure and other incident or case which may have major adverse impact on
the execution of this Contract, unless otherwise Party B notified Party A in wiring prior to the conclusion of this Contract.
3.3 The following provisions are applicable
if Party B is a legal person:
3.3.1 Party B is a company with good reputation
duly established and validly existing within the jurisdiction of the location where it is located. Party B has all corporate rights
and has obtained the government license and approval for conducting its current business.
3.3.2 Party B shall, within the time limit
requested by Party A, provide its financial statements, number of all opening accounts, loan balance and other relevant materials
requested by Party A. Party B shall ensure the genuine, completeness and objectivity of all the documents and materials provided,
which shall have no false record, misleading representation or material misstatement. The financial statements shall be prepared
strictly in accordance with the Accounting Standards of China.
3.4 The following provisions are applicable
if Party B is an individual:
3.4.1 Party B has provided his personal and
family incomes and properties, and other relevant materials required by Party A, and Party B warrants the genuine, completeness
and accuracy of the documents and materials that Party B has provided.
3.4.2 Party B warrants coordinating Party A
to supervise and inspect the incomes and credit conditions of Party B. If Party A thinks the loan guarantee conditions worsened
during the execution period of this Contract, Party B shall provide other guarantee measures accepted by Party A.
Article 4 Guarantor’s Rights and Obligations
4.1 Party B shall have the right to ask Party
A to bear confidentiality obligation for the materials provided by Party B, except otherwise prescribed by laws and regulations,
or specified by a regulatory authority or by both Parties, or non-confidential information provided by Party B.
4.2 Party B has carefully read the Main
Contract and confirmed all the clauses of the Main Contract. Party B may not confirm the single credit contract or IOU or other
credit business voucher under the Main Contract which does not exceed the specification of the Main Contract.
Party A and the Debtor may not obtain Party
B’s consent for change of the Main Contract. Party B shall continuously bear joint guarantee liability for the Main Contract
after change. However, if the principal of the debit is increased and the loan term is extended without Party B’s written
consent, Party B shall continuously bear guarantee liability according to the amount and term originally specified in the Main
Contract.
4.3 Party B shall accept and ensure to coordinate
Party A to supervise and inspection Party B’s management situations and guarantee capacity. Party B shall allow Party A to
enter Party B’s business site for inspecting Party B’s assets, financial status and management situations.
4.4 ( ) In case of transfer of major property
rights, system change or transfer of claims and debts occurring to Party B, Party B shall notify Party A of the relevant issues
in advance and obtain Party A’s written consent prior to such change.
( ) If Party B has any one of the following
circumstances, it shall notify Party A thirty days in advance. If Party A thinks it will cause significant impact on the performance
of the Contract, Party B shall obtain Party A’s written consent in advance:
(1) material change to Party B’s operating
system, equity structure, property organizational form and primary business, including but not limited to implementation of contracting,
lease, joint operation, reform of shareholding system, merger, acquisition, joint venture (cooperation), division, establishment
of a subsidiary, trusteeship (takeover), sales of enterprise, transfer of property rights and reduction of capital, etc.;
(2) disposal of important assets, of which
the value exceeds 10% of the net assets, by selling, gifting, lending, transferring, mortgaging (pledging) or other means;
(3) its dividends exceed 30% of the net profits
after tax of the current year or exceed 20% of the total undistributed profits;
(4) it adds external investment of over 20%
of its net assets after the Contract becomes valid;
(5) it changes the debt clauses with other
bank and pay off other long-term debt in advance;
(6) Party B repays its shareholder debt; or
(7) it applies other bank for a credit line,
or provides a third party with security, or reduces or exempts a third party’s debt, with the debt amount concerned exceeding
20% of its net assets.
4.5 Party B shall notify Party A within
seven working days as of the date of occurrence or possible occurrence of the following matters, and Party A shall have the right
to decide whether to request Party B and the Debtor to add guaranty or directly take back all the loans as the case may be:
(1) business or financial status is worsened;
(2) Party B is highly fined by a competent
authority or is involved in major legal dispute;
(3) Party B, its shareholder, its legal representative
or key manager is involved in an important case, or Party B’s main asset goes under property preservation or other compulsory
measures; or there is any other incident which causes Party B’s legal representative or key manager impossible to perform
his duties normally;
(4) Party B provides a third party with guarantee,
causing significant adverse impact on its financial condition or on the performance of its obligations under this Contract;
(5) Party B goes into winding-up, ceasing of
its operation for reorganization, dissolution, closedown or bankruptcy, or its business license is revoked;
(6) its economic conditions become bad, such
as unemployment, unit bankruptcy, or major loss of personal property, major adverse change of personal physical health, divorce
with spouse, and other matters which may affect Party B’s capacity to perform this Contract; or
(7) any other important event or default event
which may affect the business activities of Party B and the loan safety of Party A.
4.6 If Party B changes its domicile, mailing
address, telephone number, business scope, legal representative (work unit) or other relevant items, it shall notify Party A in
writing within seven working days after the change. In the event that Party B fails to perform the said notification obligation,
the notices and documents given by Party A according to the original mailing address shall be deemed to have been served.
4.7 ( ) Party B shall keep reasonable financial
ratios within the loan term.
( ) The financial indicators shall reach the
following standard within the loan term:
Article 5 Breach of Contract
5.1 Any one of
the following cases shall be deemed as a default event referred to herein:
(1) Party B fails to perform the compensative
liability on time and in full;
(2) Party B violates some of its warranties
and commitments or has any other behavior not performing the obligations hereunder;
(3) Party B transfers its property or draws
out capital;
(4) Party B has breach of contract under other
contracts signed and concluded with Party A or any other banks; or
(5) there is any major adverse change of Party
B’s business and financial status.
5.2 In case of any one of these default
events listed in the preceding clause, Party A shall have the right to take the following actions:
(l) To ask Party B to perform the compensative
liability immediately;
(2) To ask Party B to provide new guarantee
measures accepted by Party A;
(3) Party A claims Party B’s debtor for
the right of subrogation or appeal to the court to revoke Party B’s waiving of the creditor’s right due or Party B's
transfer of property free of charge or at an obviously unreasonable low price. Party B shall provide all necessary coordination
and assistance according to Party A’s requirements, and all the costs and expenses caused to Party A arising therefrom shall
be borne by Party B; or
(3) Other remedial measures prescribed by laws
and regulations.
Article 6 Other Provisions
( ) The Bank Enterprise Guarantee Business
Cooperation Agreement (hereinafter referred to as the Agreement) concluded and signed by and between Party A and Party B is
a fundamental legal document for standardizing the relation of rights and obligations between both Parties. In case of any discrepancy
between this Contract and the Agreement, the Agreement shall prevail.
Chapter 7 Supplementary Provisions
7.1 ( ) Both Parties agree to handle compulsory
enforcement notarization for this Contract.
If Party B fails to completely or partly perform
the obligations specified herein when compulsory enforcement notarization is handled by both Parties for this Contract, Party A
shall have the right to apply the original notary public for an enforcement certificate, and apply the competent people’s
court (the people’s court at the location where the person subject to enforcement lives or where the property of the person
subject to enforcement is located) for enforcement holding the original notarial certificate and the enforcement certificate.
(√) No compulsory enforcement notarization
shall be handled for this Contract.
7.2 Party B authorizes Party A to inquire Party
B’s credit standing including information about social insurance from the credit information database of the People’s
Bank of China, the credit database established upon approval by the competent credit investigation authorities, or relevant institutions,
departments and individuals. The credit report acquired through inquiry may be used only within the scope prescribed by the interim
measures for administration of credit information database issued by the People’s Bank of China and other relevant laws and
regulations. As agreed by Party B, Party A may provide Party B’s credit information for the credit information database of
the People’s Bank of China and the credit database established upon approval by the competent credit investigation authorities.
7.3 Please confirm the options with √
in the brackets before the selected items.
7.4 Any and all disputes arising from the execution
of the Contract shall be settled by both Parties through consultation. Where consultation fails, the following (2) shall
be adopted for dispute settlement:
(1) To apply
/ for arbitration in accordance with the
current arbitration rules of the commission. The award of the arbitration shall be final and binding upon both Parties.
(2) To initiate a lawsuit in the people’s
court at the location where Party A is located;
(3) To initiate a lawsuit in the people's court
of / .
7.5 This Contract shall be governed by the
laws of the People's Republic of China.
7.6 This Contract shall come into force upon
the signature of all the parties hereto (if one party is a natural person, the Contract shall be signed by the party; if one party
is a legal person or other organization, the Contract shall be signed or sealed by the authorized signatory and affixed with the
official seal).
7.7 This Contract shall be made out in three
originals for Party A holding two and Party B, ( ) the Debtor and ( ) the registration authority each holding one.
Unit Seal of Party A: PINGAN BANK CO., LTD.
SHENZHEN BRANCH:
Signature of Legal Representative or Authorized
Agent:
Seal of Party
B (if an unit):
Signature
of Legal Representative or Authorized Agent:
Signature of
Party B (if an individual) In person: Dangyu Pan or Authorized Agent:
Exhibit 10.4
Maximum Amount Comprehensive Credit Line
Contract
NO. SX161214000368
Borrower: Shenzhen Highpower Technology
Co., Ltd.
Address: Building A1, 68 Xinxia Street, Pinghu,
Longgang, Shenzhen.
Creditor:Bank of Jiangsu, Shenzhen
Sub-branch.
Address:4011, Shennan Road, Futian District,
Shenzhen.
According to relevant laws and regulations
of China, this contract was agreed to by the two parties, and both parties agree to comply with all terms of the contract.
Clause 1 The
maximum comprehensive credit limit(hereinafter referred to as “borrower”) means the credit line that creditor provides
to borrower who can use the credit line in the business lines agreed upon in the contract.
Clause 2 Content of the credit
1. The maximum
amount of comprehensive credit limit that creditor may provide to borrower is RMB 20,000,000.
2. The period of
the credit: From Sep 12th, 2014 to Sep 11th 2015. This period only limits the start date of the credit businesses,
not the expiration date.
3. The allotted
time, amount, interest rate and rate of single specific business under this credit contract should be agreed upon in a specific
business contract and voucher.
4. Aforesaid “The
maximum comprehensive credit limit” only includes the balance of credit principal which is the actual used credit line (deducting
any guaranty bond) less the part which has been repaid under this contract during the contract period, but includes the interest,
punitive interest compound interest and other payables which should be paid by borrower.
Clause 3 The usage of credit line
1. When borrower
needs to use the credit line under this contract, it should apply to creditor one by one, creditor has the right to audit in accordance
with fund condition of itself, the operational situation of borrower and the purpose of credit etc. If the applications are approved,
both parties should sign a specific credit business contract separately. Every single credit business contract under this contract
and relevant vouchers constitute an effective attachment to this contract.
2. Within the period
agreed upon in this contract, borrower can use the credit line according to the limit of every single credit business agreed by
this contract repeatedly, if borrower need to adjust the usage of credit line, application should be provided to creditor in writing,
and creditor decides whether the application can be approve and the method of adjustment.
4. When the credit period expires, the credit
line which is not used will automatically be cancelled.
Clause 4 Adjustment of credit line
In the process of performing this contract,
if any of the following situations, which may affect the rights of creditor, occur, creditor has the right to make relevant adjustments
and/or stop borrower from using the credit line, and cancel unused credit line of borrower.
1. The market, which is related to borrower’s
operations, has significant adverse changes, or the Country’s monetary policy has significant adjustment.
2. There are significant difficulties on the
borrower’s operational situation or important adverse changes to the borrower’s financial condition.
3. Termination of business, liquidation, restructuring,
dissolution and bankruptcy of or by borrower by an active or passive means.
4. Borrower is involved in significant litigation,
arbitration or administrative punishment, or has a significant default with other creditors.
5. Borrower indicates or expresses by its
actions that it does not intend to perform its obligations under this contract or another contract signed by creditor and borrower.
6. Borrower provides false materials or conceals
any important fact of finance or operations.
7. Borrower does not perform the obligations
agreed to in this contract or any specific credit business contract.
8. Borrower violates other contracts signed
by creditor and borrower.
9. Borrower transfers its assets, pumps money,
evades debts and engages in other behaviors which damage or might damage the rights of creditor.
10. Borrower is involved in illegal operations.
11. Division, merger, important takeover,
consolidation and reorganization of borrower.
12. Borrower loses commercial integrity.
13. Controlling shareholder of borrower transfer
is changed, or significant items happen to controlling shareholder, actual controller, legal representative, or senior executives
of borrower, including but not limited to becoming involved in illegal actions, litigation, arbitration, deterioration of financial
condition, bankruptcy, dissolution etc.
14. A Guarantor of the credit business under
this contract defaults, such as by providing false information; violating other contracts signed by creditor or other third parties
becoming involved in litigation, arbitration, business failures, or illegal actions;, ceasing doing business; evading bank creditor’s
rights; merging, consolidating, or reorganizing; or other situation which may affect guaranty ability of Guarantor.
15. Other situations that damage the rights
and interests of creditor.
Clause 5 Rights and obligations of borrower
1. Having
the right to apply for using the credit line.
2. Opening a settlement account in Bank of
Jiangsu, Shenzhen Sub-branch, and arranging settlement of both domestic and overseas accounts, foreign exchange settlements and
sale and other intermediate business in Bank of Jiangsu or its sub-branch more than the proportion of the credit line which borrower
gets from creditor and all credit line of borrower.
3. Borrower should provide true documents
and information to creditor (including but not limited all bank accounts, balance of deposits and loans, situations of using loans,
condition of assets, operations, and inner management etc.
4. Providing last month’s financial
statements before the 20th of each month, and providing audited financial statement to creditor within120 days after a fiscal year,
and providing changes and modifications of itself to creditor.
5. Accepting and cooperating with creditor
in surveying, supervising and examining on the use of credit, related production, management, financial situation and operations.
6. Complying with this contract and every
single business contract under this contract strictly.
7. When used credit exceeds the credit line
agreed to in this contract results from the change of exchange rate, borrower should repay the exceeding part or pay homologous
security deposit.
8. If any of the following situations occurs,
borrower should provide notice in writing to creditor within 5 days of the occurrence of the related situation and implement security
measures acceptable to creditor.
(1) Changes of membership function, executives,
articles of association and organization.
(2) Stopping production, going out of business,
cancelling registration, having it business license cancelled or filing for bankruptcy.
(3) Changes of name, domicile, legal representative,
contact manner and so on.
(4) Financial standing depravation, significant
difficulty on operations, significant litigation or arbitration.
(5) Other things that have significant effect
on the rights and interests of creditor.
9. Borrower should ask for creditor’s
consent and implement security measures, which are acceptable to creditor, before taking following actions.
(1) Contract management, lease, stock system
reform, joint operation, consolidation, merger, discrete, joint venture, asset transference, reducing registered capital, applications
of suspensions, dissolution, bankruptcy and other actions which can affect rights and interests of creditor.
(2) Providing a guarantee for other’s
debts, or pledging or mortgaging any of its major assets to a third party, leading to affecting borrower’s repayment ability
under this contract.
10. When the guarantor, whether under this
contract or under a single business contract of this contract, loses its guarantee ability, or a pledge, which is under this contract
or under a single business contract of this contract, depreciates in value, borrower should take other guarantee measures, which
are acceptable to creditor, in time.
11. Borrower is not allowed to sign a contract,
which can damage the rights and interests of creditor, with any other third party.
Clause 6 Rights and obligations of creditor
1. Accepting and
reviewing borrower’s application of using the credit.
2. The financial conditions and operations
of borrower should be kept secret by Party B, except the laws, administrative laws and regulations, normative documents requested.
3. Having the right to ask borrower to provide
related information of the credit, having the right to know the production, financial condition, operation, and repayment plan
of borrower, and having right to extract and copy from account books, operations records and related information.
4. Having the right to supervise borrower’s
uses the credit according to this contract and single credit business contract.
5. Having the right to collect principal,
interest, and other related expenses from Party A’s account on schedule or in advance.
6. If borrower fails to act or violates the
obligations under this contract or single credit business contract of this contract, creditor has the right to adjust the maximum
amount of comprehensive credit line, and stop using credit line, cancel unused credit line of borrower, demand accelerated repayment
of credit.
7. Having the right to query the credit inquiry
of borrower, the legal representative of borrower and executives of borrower, and having the right to provide the information of
borrower to the people’s Bank of China etc.
8. If borrower fails to comply with its repayment
obligations under this contract or single credit business contract of this contract, defaults of borrower can be announced in public
by creditor.
Clause 7 All debts (including punitive
interest and related expense) under the contract are guaranteed by Maximum Amount Guaranty Contract (NO.BZ161214000045) signed
by SPRINGPOWER TECHNOLOGY (SHENZHEN) CO., LTD. and the creditor, and Maximum Amount Personal Joint Responsibility Guarantee(BZ161214000046)
signed by DANGYU PAN and the creditor.
Clause 8 Expense
1. The expenses
of credit information, notarization, testimony, register etc. under the contract should be paid by borrower.
2. The expenses resulting from borrower non-repayment
of debt, such as advertising fees, delivery fees, appraisal costs, counsel fees, legal fares, travel expenses, valuation fees,
auction fees, property preservation fees, enforcement fees etc., should be paid by borrower.
Clause 9 Modification, dissolution and
execution of civil right of the contract
1. When agreed by both parties, this contract
can be modified and dissolved in writing.
2. Any tolerance, extension or delay from
creditor to borrower in exercising its rights under this contract does not affect the rights creditor enjoys according to this
contract and laws and regulations, and cannot be considered as approval to the default, and does not mean the abdication of the
right.
3. If any item of this contract becomes invalid
because of any reason, borrower still should assume all responsibilities. If any of the above situations happen, creditor has the
right to terminate this contract, and ask borrower to repay all debt immediately.
4. If borrower violates the obligations stated
in the eighth item of clause 5 of this contract, it will be considered delivered if the creditor will have mailed related notices
to original address provided.
5. Any related notices and documents should
be sent in writing by both parties.
Clause 10 Borrower agrees that the
creditor’s rights under this contract can be enforced after notarization. When borrower does not carry out obligations under
the contract completely or partly, creditor can apply for enforcement to a competent court.
Clause 11 Applicable Law and Resolution
for dispute
The making, efficacy,
explanation, performance and resolution for dispute of the contract are subject to the applicable to the laws of People’s
Republic of China. During the performance of this contract or all disputes relating to this contract, the two parties will attempt
settle through negotiations. If through negotiation the parties cannot reach agreement, both parties can apply to the local people’s
court of creditor.
Clause 12 Effective and invalid of the
contract
1. This contract
is entered into force upon the date when it is signed or sealed and affixed with official seals by the legal representative or
entrusted agents of borrower and creditor.
2. This contract become invalid after borrower
accomplishes all repayment responsibility under this contract.
Clause 13 This contract is signed in
triplicate, creditor holds two copies, borrower holds one copy, three copies have equal legal effect.
The things which
are not mentioned in this contract should be explained and settled according to relevant laws, administrative laws and regulations,
normative documents and single credit business contract, and the related regulations of Bank of Jiangsu.
Clause 15 Prompt
Borrower has known
the business scope and grant privilege of Party B. Borrower has read all terms of the contract. Creditor has explained homologous
terms requested by borrower. Borrower has known the meaning of all terms of the contract and homologous legal consequence. Signing
the contract is the true will of borrower.
/s/ [COMPANY SEAL]
Borrower (stamp)
Legal Representative or agent (signature):
Oct 28, 2014
/s/ [COMPANY SEAL]
Creditor (stamp)
Legal Representative or agent (signature):
Oct 28, 2014
Supplementary Agreement
The credit line hereunder shall cover the
credit line under the Maximum Comprehensive Credit Contract of No. SX161213000377 (hereinafter referred to as the Original
Contract) from the date of completion of security under the line. The unpaid line used in the Maximum Comprehensive Credit Contract
of No. SX161213000377 under the Original Contract shall occupy the credit line under this Contract. The aforesaid contract shall
be deemed as a single credit business contract under this Contract, shall be brought into uniform management within this credit
line and shall be secured by a relevant guarantee contract in a unified way under this Contract.
| 1. | The credit granted by the Credit Grantor shall be used for purchasing raw materials and for other
normal business turnover. To make payment for a single business, the effective transaction contract or order and other relevant
materials not lower than the amount of payment for the single business shall be provided. The corresponding VAT invoice shall be
timely supplemented if a note is required. The credit granted by the Credit Grantor shall not be used for any affiliated transaction
without a real trade background, nor be used for investment in fixed asset projects, equity and securities. |
| 2. | The Fiduciary shall make up the note exposure in advance according to the requirements specified
in the single note contract. |
| 3. | During the period of credit granting by the Credit Grantor, except the current financing bank,
if the guarantee conditions provided by the other financing (except project loan) added by the Fiduciary are better than those
provided by the Credit Grantor, agreement shall be obtained from the Credit Grantor. |
| 4. | In case of any breach of these clauses, or in case of any situation specified in Article 4 of the
Maximum Comprehensive Credit Contract of No. SX161214000368 which endangers or may endanger the rights and interests of
the Credit Grantor during the performance of the Contract, the Credit Grantor shall have the right to charge 1% of the line exposure
amount as penalty and announce acceleration of maturity of the credit, in addition to the relevant rights under the Maximum
Comprehensive Credit Contract. |
| 5. | The amount of settlement that the Fiduciary makes in the Credit Grantor shall match with the use
of credit of the Credit Grantor, or the Credit Grantor shall have the right to decide the use and renewal of the line according
to the settlement conditions of the Fiduciary. |
This Supplementary Agreement shall be supplementary
provisions to the Maximum Comprehensive Credit Contract (Contract No.: SX161214000368) and shall have the same equal legal
force with the Maximum Comprehensive Credit Contract. In case of any discrepancy between these supplementary provisions
and the Contract, these supplementary provisions shall prevail, and the other clauses shall remain unchanged.
Fiduciary (Official Seal): |
Credit Grantor (Official Seal): |
|
|
SPRING POWER TECHNOLOGY |
BANK OF JIANGSU SHENZHEN |
(SHENZHEN) COMPANY LIMITED (SEAL) |
BRANCH (SEAL) |
|
|
Legal Representative or |
Legal Representative or |
Authorized Representative |
Authorized Representative |
|
|
Oct. 28, 2014 |
Oct. 28, 2014 |
Exhibit 10.4(a)
Maximum Amount Personal Joint Responsibility Guarantee
NO. BZ161214000046
To: Bank of Jiangsu, Shenzhen Sub-branch
To ensure the performance of Creditor’s
right under the Article 1 of the master contract, the guarantor agrees to provide joint responsibility and promises as follows:
Article 1 The master contract
The master contract is A:
A. “Maximum Amount Comprehensive Credit Line
Contract” signed by bank and debtor, and the contract number is “SX 161214000368”
Article 2 The guaranteed creditor’s right and period
Except the period determined in accordance with the law or contract,
the debt under the master contract makes the guaranteed creditor’s right during the following period:
The period of Maximum Amount Comprehensive Credit Line Contract
in Article 1
Aforesaid period indicates the date of occurrence, and does not
limit the date of expiration.
Article 3 Guarantee Covers
The guarantee coverage: the principal and interest (including punitive
interest and compound interest) of all loans (credit) outstanding between debtor and Creditor according to the master contract,
the punitive sum that debtor should pay to Creditor; compensation and other expenses Creditor charges for realizing its creditor’s
rights (including but not limited legal fees, arbitration fees, property preservation fees, execution fees, valuation fees, auction
fees, attorneys’ fees, travelling fees, etc.).
Article 4 Guaranty Method
Guarantor voluntarily provides the joint liability guarantee, when
debtor does not perform its obligations related to the debt according to the master contract, no matter what other guarantee Creditor
has for ensuring the creditor’s rights under the master contract (including but not limited to guarantees, mortgages, pledges,
etc.), Creditor has the right to ask guarantor to take guarantee responsibilities within guarantee coverage.
Article 5 Maximum amount of the guaranty
The maximum amount which the guarantee assumed hereunder is at most
no more than RMB twenty million only. The maximum amount of guaranty hereon is the loan principal balance by total amount (meaning
the line of credit deducting the amount of cash deposit) of use of loans and facility actually under the master contract signed
between creditor and debtor and in the period as mentioned in the contract deducting amounts repaid, excluding the proceeds of
payable except the principal stipulated in article 3, such as interest expenses and penalties, etc., but the guarantee shall still
assume the joint liquidated liability.
The guarantor agrees that the debtor can recycle the loans under
master contract, and agrees that the debtor can adjust the credit line of all kinds of loans within the line of credit hereunder,
and the guarantor shall assume the joint guarantee liability.
Article 6 Warranty Period
The warranty period of this contract is from the effective date
of this contract to 2 years after the maturity date of the debts (including deferred loans) under master contract.
Article 7 Changes of Master contract
The warranty obligations of this contract will not be affected by
any changes (including but not limited to modifying, supplying and deleting etc.) of the master contract agreed by creditor and
debtor except the amount of the loan. If creditor and debtor agree with delaying to repay the debt, this contract is still effective.
Creditor may transfer its creditor’s right to a third party
legally, and guarantor shall assume the same warranty responsibilities as before.
Article 8 Independence of this guarantee
This guarantee is independent of the master contract ,the effectiveness
of this guarantee is not affected if the master contract is invalid completely or partly. If the master contract is considered
as invalid, guarantor assumes joint security responsibility to the debt resulting from debtor’s returned property or pay
for the damage. Guarantor promises to supervise debtor’s use the loan (credit), and if debtor changes the purpose of the
loan (credit), guarantor still assumes warranty responsibility.
Any tolerance, extension, privilege or delay from creditor to guarantor
for exercising of its rights under this contract does not affect, injure and limit the rights creditor enjoys according to this
contract and laws and regulations, and cannot be considered as the abdication of the related right according this contract, and
will not affect the obligations of guarantor under this contract.
The efficacy of this guarantee will not be affected by any contract,
agreement, and guarantee, and tacit agreement, or dispute.
Warranty obligations of guarantor (including the inheritor, assignee
and conservator of guarantor) are continuous, and have no effect on any change of guarantor and debtor (including but not limited
in division, merger, reorganization, transactions of property right and operational right). If debtor’s subject qualification
ceases to exist before debtor repays all debt to creditor, or creditor announces its subject qualification ceases to exist within
6 months since debtor repaid all debt result in the foregoing repayment become invalid, the warranty obligations under this contract
are still effective.
Article 9 Guaranty
Guarantor agrees to assume warranty responsibility by all his property
(including family possessions; since the date of signing this guarantee, guarantor will not allowed to dispose the above property
without Creditor’s consent, if Creditor thinks it is necessary that the above property can be guaranteed, mortgaged or pledged,
guarantor promise to assist to process above procedures.
During the warranty period, guarantor promises that he will not
provide guarantee which exceeds his warranty ability to a third party. If the above property is insufficient to afford the guarantee
responsibility, guarantor promises to assume repayment responsibility for the insufficient part.
If Creditor feels necessary, guarantor agrees to provide the list
of all his assets, and evaluate the assets on the list, guarantor will pay any valuation fee. Guarantor promises that he enjoys
ownership and the right of disposal of all assets on the list.
Article 10 Advanced Guarantee Responsibilities
During the warranty period, when any default under master contract
or other situations which is considered as can affect the realization of creditor’s right by Creditor happen, Creditor can
announce the debt immediately due and payable, and has the right to ask the guarantor to assume security responsibility on the
date announced by Creditor, guarantor agrees to assume the security responsibility as Creditor requested.
Article 11 Receiving Payables
Creditor has the right to take payment from guarantor’s account
in bank of Jiangsu for all payables of guarantor in the range of warranty coverage. If the payment is foreign currency, it will
be calculated according to the rate Creditor announced on the day.
Article 12 Other Items
1. During warranty period, Creditor has the right to supervise the
funds and financial condition of guarantor, and guarantor should provide true information.
2. Guarantor authorizes the Creditor to claim for creditor’s
due right, the money collected should be repaid Creditor to the Creditor as priority.
3. If the loan, which is under the master contract or a specific
credit business of the master contract, is not paid as agreed, or is changed the way of payment, guarantor shall still assume security
responsibility.
Article 13 Settlement of Dispute
When there is any dispute in performing the contract, both parties
should settle the dispute through negotiations at first, if negotiations cannot reach an agreement, both parties can apply to the
local people’s court of Creditor.
During the litigation or arbitration period, the items of this contract
which are not involved in the dispute still should be performed.
Article 14 Becoming Effective
This guarantee comes into force as of being signed by guarantor
Article 15 Statements
1. Guarantor knows the business scope and limits of authority of
Creditor.
2 The guarantor has read the contract comprehensively and carefully
and fully understands the master contract entered into between creditor and debtor, upon the request of guarantor, the creditor
has made the terms interpretation accordingly as for the master contract and the contract hereunder, and the guarantor is fully
aware of and understands all the terms of the master contract and the contract hereunder, and signed this contract with willingly.
The guarantor is fully aware of the legal consequences for the conclusion and performance of the master contract and the contract
hereunder may give rise to, and fully confirms the obligations related to this contract.
3. Guarantor has the right to sign this guarantee.
4. Guarantor should give the consent that, Creditor might somehow
authorize other affiliated institution of Jiangsu bank to perform the obligation. The performing party entitles all the rights
and obligations under this contract and the affiliated credit line contracts, the performing party reserves the rights to appeal
a resolution of dispute if necessary.
5. It should be noticed to Creditor in writing of any changes of
guarantor’s abode, postal address, contact number etc. in 10 days after the changes happen. It will be considered as if the
information has been delivered if Creditor sends related notices and documents according to the primary address on file if the
guarantor does not provide such notice.
6. If a notary agency mandates enforceable status to this contract,
guarantor agrees to be enforced by the legislative body and gives up the right of defense.
Guarantor (signature): |
/s/ Dangyu Pan |
Exhibit 10.4(b)
Maximum Amount Guaranty Contract
Contract No.:NO: BZ161214000045
Guarantor: Springpower Technology (Shenzhen)
Co., Ltd.
Address: Workshop A, Shun Industrial Zone,
Baoan District
Creditor: Bank of Jiangsu, Shenzhen Sub-branch.
Address:4011, Shennan Road, Futian District,
Shenzhen.
In order to guarantee the performance of
debts under item one of this contract, the guarantor provides the guarantee to the creditor voluntarily, and the two parties entered
into this contract after equal negotiation.
Article 1: Master contract
The master contract
hereunder is A .
A. The creditor
and the debtor Shenzhen Highpower Technology Company Limited entered into this contract of maximum amount
comprehensive credit line whose number is SX 161214000368, and has or will enter into the separate facility
business contract, as well as amendments and supplements.
B. The creditor and the debtor, from year month day to year month day
, entered into the contracts of loans, bank acceptance drafts, trade financing, letter of guarantee, funds business, and other
agreement, as well as amendments and supplements.
Article 2: Primary credit and period
Except the period
determined or agreed separately in accordance with the laws, the actual credit under the master contract consists of the primary
credit of the contract in the below period: A .
A. From the effective
date of “maximum amount comprehensive credit line contract” in article one to the expiration date of facility period
stipulated in this contract and amendments or supplements.
B. From ___ year
__ month ___ day __ to __ year __ month __ day under article one of this contract.
Article 3: Guarantee Coverage
The scope of
guaranty of creditor hereunder covers all debts occurring under this contract by the debtor, including but not limited to principal,
interest expenses, compounded interests, penalties, processing fees, default expenses, damage compensation, legal fees, escrow
fees, taxation expenses, arbitration fees, travel fees, assessment fees, auction fees, property preservation fees, compulsory execution
fees and other expenses for realization of the creditor’s rights.
Article 4: Maximum amount of the guaranty
The maximum amount
which the guarantee assumed hereunder is at most no more than RMB 20 million only. The maximum amount of guaranty hereon
is loan principal balance by total amount (meaning the line of credit deducting the amount of cash deposit) of use of loans and
facility actually under the master contract signed between creditor and debtor and in the period as mentioned in the contract deducting
the part of repaid, excluding the proceeds of payable except the principal stipulated in article 3, such as interest expenses and
penalties, etc., but the guarantee shall still assume the joint liquidated liability.
The guarantor agrees that the debtor can
recycle the loans under master contract, and agrees that the debtor can adjust the credit line of all kinds of loans within the
line of credit hereunder, and the guarantor shall assume the joint guarantee liability.
Article 5: The guarantor has read
the contract comprehensively and carefully and fully understands the master contract entered into between creditor and debtor,
and upon the request of guarantor, the creditor has made the terms interpretation accordingly as for the master contract and the
contract hereunder, and the guarantor is fully aware of and understands all terms of the master contract and the contract hereunder,
and signed this contract willingly. The guarantor is fully aware of the legal consequences for the conclusion and performance of
the master contract and the contract hereunder may give rise to, and fully confirms the obligations related to this contract.
Article 6: The guarantor shall assume
the responsibilities for all debts owed by the debtor to the creditor under the master contract, including the debts arising from
prepayment requested by the creditor. After receiving the written notice sent by creditor, the guarantor shall perform the settlement
responsibilities according to the time, type of currency, amount, and method of settlement specified by the creditor, and commit
to the creditor that the creditor has the right to deduct all amounts of guaranty from the guarantor’s account when the creditor
deems appropriate, if the deducted proceeds constitute foreign currency, the currency shall be calculated according to the bid
price published by the creditor at the deducted date.
Article 7: The guarantee obligation
of the guarantor (including the inheritor, assignee, and conservator of the guarantor) are continuous under this contract, and
shall not be affected by the change of the guarantor or the debtor (including but not limited to merger, split, recombination, conduct
title transaction or transactions of managerial authority by way of lease, contract, and so on). If the debtor’s subject
qualification ceases to exist before debtor repays the loans hereunder, or the debtor declares that its subject qualification ceases
within six months from the date debtor repaid all of the loans leading to its foregoing repayment activity invalid, the guarantor’s
warranty obligations is still effective.
Article 8: The term of the guaranty
hereunder is from the date of effective to two years after expiration of the debts hereunder (including the maturity of extension
period).
Article 9: The guaranty obligations
under this contract shall not be affected by any change in the terms and conditions of the master contract agreed by both creditor
and debtor (including but not limited to amendments, supplements, and cancellations). If the creditor and debtor agree to extend
or delay the performance of the obligations hereunder, the contract hereunder shall continue to be valid. In the event of the creditor
transfers its creditor’s right to others in the period of guaranty according to the law, the guarantor will continue to assume
the guaranty responsibility within the scope of the guaranty.
Article 10: The guarantor makes
the following commitment to the creditor unconditionally and irrevocably: if the debtor fails to or delays to fulfill the obligations
of the master contract, or confirms the invalidity of the master contract, or due to the guarantor fails to or delays performance
of any clause hereunder leading to a loss to the creditor, all of such losses shall be a debt payable byte guarantor to the creditor.
Article 11: Whatever reasons leading
to the master contract being invalid in law or partially invalid, the guarantor shall still assume the guaranty responsibility
for the debtor’s repayment liability in accordance with the terms listed hereunder. The guarantor’s pledge to monitor
the debtor’s use of the loans (facility), in the event of the debtor’s change the purpose of the loan, the guarantor
shall still assume the guaranty responsibilities.
Any tolerance, grace or postponement of
the exercise of any right preferential by the creditor to the guarantor under this contract, shall not affect, damage, or restrict
the creditor’s rights in accordance with the contract hereunder, laws and regulations, and normative documents, and shall
not be deemed as giving up the rights and benefits under this contract, and shall not affect any obligations assumed by the guarantor
under this contract.
Article 12: If there is any collateral
security other than this guarantee under this contract, the guarantor is willing to perform the joint guaranty responsibility prior
to collateral security on all guaranty debts.
Article 13: The guarantor is an
entity established in accordance with the laws, is qualified to identify the contract hereunder and perform joint guaranty responsibility.
In addition, signing this contract has obtained empowerment thereof, and the process of performing the contract has been completed.
Article 14: The guarantor’s
signing and performance of this contract is its real intention, is true and effective and legal, and shall not affected by any
relationship of any party hereunder and others or other any events.
Article 15: The debts hereunder
have equal position with guarantor’s other debts, and shall be in the same compensation sequence.
Article 16: If the guarantor enters
into the counter guarantee contract with the debtor upon this contract, this counter guarantee contract shall not damage the creditor’s
interests, and when the guarantor’s compensation arising from the counter guarantee contract and the creditor’s claim
are in the same sequence, the creditor shall be compensated prior to the guarantor.
The guarantor shall not request the debtor
to set up a counter guarantee by way of a property pledge as to the obligations assumed by the debtor hereunder.
Article 17: The guarantor’s
responsibility shall decrease gradually with the decrease of the debts hereunder.
Article 18: The guarantor shall
provide the true, complete, valid financial statements and other relevant materials and information as required by the creditor.
Article 19: In the event of guarantor
changes its residence, mailing address, telephone number, the scope of its business, or the legal representative, it shall notice
the creditor in written within 10 days from the date the change events occurred.
Article 20: If a notary agency mandates
enforceable status to this contract, guarantor agrees to be enforced by the legislative body and gives up the right of defense.
Article 21: The application of laws
and resolution of dispute
The signing, effectiveness, interpretation,
performance and settlement of disputes of this contract shall apply for the People's Republic of China's laws. If there are any
disputes based on this agreement, the contracting parties could attempt to resolve them through negotiation. If negotiation fails,
the parties shall resolve the disputes according to the following way of A :
A. Institute
legal proceeding to the court where the creditor located.
Article 22: This contract and any
modifications and supplements of it are entered into in force upon the date when it is signed or sealed and affixed with official
seals by the legal representative or entrusted agents of both parties.
Article 23: Other items appointed by
both parties.
The things which
are not mentioned in this contract should be explained and settled according to relevant laws, administrative laws and regulations,
normative documents and the related regulations of Bank of Jiangsu.
Article 24: This agreement is in
triplicate, Party A has one copy, Party B has two copies, and three copies have the same legal effect.
Guarantor (stamp): /s/ [COMPANY SEAL]
Legal representative or agent:
Creditor (stamp): /s/ [COMPANY SEAL]
Legal Representative or agent:
Exhibit 10.5
Maximum Amount Comprehensive Credit Line
Contract
NO. SX161214000369
Fiduciary: Springpower Technology (Shenzhen)
Co., Ltd
Address: Building A, Chaoshun Industrial Zone,
Renmin Street, Danhu, Guanlan Road, Baoan, Shenzhen
Creditor: Bank of Jiangsu, Shenzhen
Sub-branch.
Address: 4011, Shennan Road, Futian District,
Shenzhen.
According to relevant laws and regulations
of China, this contract was agreed by two parties, and both parties agree to comply with all terms of the contract.
Clause 1 The maximum comprehensive
credit limits (hereinafter referred to as “fiduciary”) means the credit line that creditor provide to fiduciary who
can use the credit line in the business lines agreed by the contract.
Clause 2 Content of the credit
1. The maximum amount of comprehensive credit
limits that creditor provide to fiduciary is RMB 10,000,000.
2. The period of the credit: From Sep 12th,
2014 to Sep 11th, 2015. This period only limits the start date of the credit businesses but the expiration date.
3. The allotted time, amount, interest rate
and rate of single specific business under this credit contract should be agreed by accordingly specific business contract and
voucher.
4. Aforesaid “The maximum comprehensive
credit limits” only includes the balance of credit principal which is the actual used credit line (deducts guaranty bund)
deducts the part which has been repaid under this contract during the contract period, but the interest, punitive interest compound
interest and other payables which should be afforded by fiduciary.
Clause 3 The usage of credit line
1. When fiduciary need to use the credit line
under this contract, should apply to creditor one by one, creditor has the right to audit in accordance with fund condition of
itself, operation situation of fiduciary and the purpose of credit etc. If the applications are approved, both parties should sign
the specific credit business contract separately. Every single credit business contract under this contract and relevant voucher
constitute the effective attachment of this contract.
2. Within the period agreed in this contract,
fiduciary can use the credit line according to the limit of every single credit business agreed by this contract repeatedly, if
fiduciary need to adjust the usage of credit line, application should be provided to creditor in writing, and creditor decides
whether the application can be approve and the method of adjustment.
3. the following is out of the credit:
4. When the credit become expiring, the credit
line which is not used will automatically be cancelled.
Clause 4 Adjustment of credit line
In the process of performing this contract,
if following situations, which may affect the right of creditor, occur, creditor has the right to make relevant adjustment and/or
stop fiduciary using credit line, and cancel unused credit line of fiduciary.
1. The market, which is related to fiduciary’s
operation, has significant adverse changes, or Country’s monetary policy has significant adjustment.
2. There are significant difficulties on operation
situation or important adverse changes on financial conditions to fiduciary.
3. Termination of business, liquidation, restructuring,
dissolution and bankruptcy of fiduciary by an active or passive means.
4. Fiduciary is involved in significant litigation,
arbitration or administrative punishment, or has significant default with other creditors.
5. Fiduciary indicates or expresses by its
actions that it does not perform its obligations under this contract or other contract signed by creditor and fiduciary.
6. Fiduciary provides false materials or conceals
any important fact of finance and operation.
7. Fiduciary does not perform the obligations
agreed in this contract or specific credit business contract.
8. Fiduciary violates other contracts signed
by creditor and fiduciary.
9. Fiduciary transfers its assets, pumps money,
evades debts and has other behaviors which damage or might damage the rights of creditor.
10. Fiduciary is involved in illegal operations.
11. Division, merger, important takeover,
consolidation and reorganization of fiduciary.
12. Fiduciary loses commercial integrity.
13. Controlling shareholder of fiduciary transfer
is changed, or significant items happen to controlling share holder, actual controller, legal representative, senior executives
of fiduciary, including but not limited to be involved in illegal actions, litigation, arbitration, deterioration of financial
condition, bankruptcy, dissolution etc.
14. Guarantor of the credit business under
this contract default, such as providing false information, violating other contracts signed by creditor or other third parties,
involved in litigation, arbitration, stopping doing business, business failures, illegal actions, evading bank credit’s right,
merging, consolidation, reorganization, and other situation which may affect guaranty ability of Guarantor.
15. Other situations damage rights and interests
of creditor.
Clause 5 Rights and obligations of fiduciary
1. Having the right to apply for using the
credit line.
2. Opening settlement account in Bank of Jiangsu,
Shenzhen Sub-branch, and arrange settlement of both domestic and overseas accounts, foreign exchange settlement and sale and other
intermediate business in Bank of Jiangsu or its sub-branch more than the proportion of the credit line which gets from creditor
and all credit line of fiduciary.
3. Fiduciary should provide true documents
and information to creditor (including but not limited all bank accounts, balance of deposit and loans, situations of using loans,
condition of assets, operation, and inner management etc.
4. Providing last month’s financial
statement before the 20th of each month, and providing audited financial statement to creditor in120 days after fiscal year, and
providing changes and modifications of itself to creditor.
5. Accepting and cooperating with creditor
in surveying, supervising and examining on the situation of using credit, related production, management, financial operation.
6. Complying with this contract and every
single business contract under this contract strictly.
7. When used credit exceed the credit line
agreed in this contract result from the change of exchange rate, fiduciary should repay the exceeding part or pay homologous security
deposit.
8. If following situation occurs, fiduciary
should notice in writing creditor in 5 days since related situation happens and implement security measure which is accepted by
creditor.
(1) Changes of membership function, executives,
articles of association and organization.
(2) Stopping producing, going out of business,
cancelling registration, being cancelled business license or being applied for bankruptcy.
(3) Changes of name, domicile, legal representative,
contact manner and so on.
(4) Financial standing depravation, significant
difficulty on operation, significant litigation or arbitration.
(5) Other things have significant affect on
rights and interests of creditor.
9. Fiduciary should ask creditor’s consent
and implement security measure, which is accepted by creditor, before taking following actions.
(1) Contract management, lease, stock system
reform, joint operation, consolidation, merger, discrete, joint venture, asset transference, reducing registered capital, applications
of suspensions, dissolution, bankruptcy and other actions which can affect rights and interests of creditor.
(2) Providing guarantee for other’s
debts, or pledging or mortgaging major asset of itself to third party, leading to affect the repayment ability under this contract.
10. When the guarantor, which is under this
contract or under single business contract of this contract, loses guarantee ability, or pledge, which is under this contract or
under single business contract of this contract, depreciates in value, fiduciary should take other guarantee measures, which are
accepted by creditor, in time.
11. Fiduciary is not allowed to sign the contract,
which can damage the rights and interests of creditor, with any other third party.
Clause 6 Rights and obligations of creditor
1. Accepting and reviewing fiduciary’s
application of using the credit.
2. The financial conditions, operation of
fiduciary should be kept secret by Party B, except the laws, administrative laws and regulations, normative documents requested.
3. Having the right to ask fiduciary to provide
related information of the credit, having the right to know the production, financial condition, operation, and repayment plan
of fiduciary, and having right to extract and copy from account books, operation record and related information.
4. Having the right to supervise fiduciary
uses the credit according to this contract and single credit business contract.
5. Having the right to collect principal,
interest, and other related expenses from Party A’s account on schedule or in advance.
6. If fiduciary fails to act or violate the
obligations under this contract and single credit business contract of this contract, creditor has the right to adjust the maximum
amount of comprehensive credit line, and stop using credit line, cancel unused credit line of fiduciary, regain used credit in
advance.
7. Having the right to query the credit inquiry
of fiduciary, the legal representative of fiduciary and executives of fiduciary, and has the right to provide the information of
fiduciary to the people’s Bank of China etc.
8. If fiduciary fails to act repayment obligations
under this contract and single credit business contract of this contract, defaults of fiduciary can be announced in public by creditor.
Clause 7 All debts (including punitive
interest and related expense) under the contract are guaranteed by Maximum Amount Guaranty Contract (NO.BZ161214000050) signed
by ICON ENERGY SYSTEM COMPANY LIMITED and the creditor, and Maximum Amount Personal Joint Responsibility Guarantee (BZ161214000048)
signed by PAN DANGYU 、YIN ZHOUTAO and the creditor.
Clause 8 Expense
1. The expense of credit information, notarization,
testimony, register etc under the contract should be afforded by fiduciary.
2. The expense result from fiduciary does
not repay related debt, such as advertising fee, delivery fee, appraisal cost, counsel fee, legal fare, travel expense, valuation
fee, auction fee, property preservation fees, enforcement fee etc, should be afforded by fiduciary.
Clause 9 Modification, dissolution and
execution of civil right of the contract
1. Agreed by both parties, this contract can
be modified and dissolved in written.
2. Any tolerance, extension or delay from
creditor to fiduciary for exercising of rights under this contract does not affect the rights creditor enjoys according to this
contract and laws and regulations, and cannot be considered as approval to the default, and does not mean the abdication of the
right.
3. Any item of this contract become invalid
because of any reasons, fiduciary still should assume all responsibilities. If above situation happens, creditor has the right
to terminate this contract, and ask fiduciary to repay immediately.
4. If fiduciary violate the obligation regulated
in eighth item of clause 8 of this contract. It will be considered as the information has been delivered that related notices and
documents sent by creditor according to primary address result from fiduciary does not perform above obligations.
5. Any related notices and documents should
be sent in written by both parties.
Clause 10 Fiduciary agrees that the
credit’s rights under this contract can be enforced after notarization. When fiduciary does not carry out obligations under
the contract completely or partly, creditor can apply enforcement to competent court.
Clause 11 Applicable Law and Resolution
for dispute
The making, efficacy, explanation, performance
and resolution for dispute of the contract are applicable to the laws of People’s Republic of China. During the performance
of this contract or all disputes relating to this contract, the two parties settle through consultations. If negotiation cannot
reach agreement, both parties can apply to the local people’s court of creditor.
Clause 12 Effective and invalid of the
contract
1. This contract enters into force upon the
date when it is signed or sealed and affixed with official seals by the legal representative or entrusted agents of fiduciary and
creditor.
2. This contract become invalid after fiduciary
accomplishes all repayment responsibility under this contract.
Clause 13 This contract is signed in
triplicate, creditor holds two copies, fiduciary holds one copy, three copies have the equal legal effect.
The things which
are not mentioned in this contract should be explained and settled according to relevant laws, administrative laws and regulations,
normative documents and single credit business contract, and the related regulations of Bank of Jiangsu.
Clause 15 Prompt
Fiduciary has known the business scope and
grant privilege of Party B. Fiduciary has read all terms of the contract. Creditor has explained homologous terms requested by
fiduciary. Fiduciary has known the meaning of all terms of the contract and homologous legal consequence. Signing the contract
is the true will of fiduciary.
Fiduciary (stamp)
Legal Representative or agent (signature):
Creditor (stamp)
Legal Representative or agent (signature):
Supplementary Agreement
The credit line hereunder shall cover the
credit line under the Maximum Comprehensive Credit Contract of No. SX161213000233 (hereinafter referred to as the Original
Contract) from the date of completion of security under the line. The unpaid line used in the Maximum Comprehensive Credit Contract
of No. SX161213000233 under the Original Contract shall occupy the credit line under this Contract. The aforesaid contract shall
be deemed as a single credit business contract under this Contract, shall be brought into uniform management within this credit
line and shall be secured by a relevant guarantee contract in a unified way under this Contract.
| 1. | The credit granted by the Credit Grantor shall be used for purchasing raw materials and for other
normal business turnover. To make payment for a single business, the effective transaction contract or order and other relevant
materials not lower than the amount of payment for the single business shall be provided. The corresponding VAT invoice shall be
timely supplemented if a note is required. The credit granted by the Credit Grantor shall not be used for any affiliated transaction
without a real trade background, nor be used for investment in fixed asset projects, equity and securities. |
| 2. | The Fiduciary shall make up the note exposure in advance according to the requirements specified
in the single note contract. |
| 3. | During the period of credit granting by the Credit Grantor, except the current financing bank,
if the guarantee conditions provided by the other financing (except project loan) added by the Fiduciary are better than those
provided by the Credit Grantor, agreement shall be obtained from the Credit Grantor. |
| 4. | In case of any breach of these clauses, or in case of any situation specified in Article 4 of the
Maximum Comprehensive Credit Contract of No. SX161214000369 which endangers or may endanger the rights and interests of
the Credit Grantor during the performance of the Contract, the Credit Grantor shall have the right to charge 1% of the line exposure
amount as penalty and announce acceleration of maturity of the credit, in addition to the relevant rights under the Maximum
Comprehensive Credit Contract. |
| 5. | The amount of settlement that the Fiduciary makes in the Credit Grantor shall match with the use
of credit of the Credit Grantor, or the Credit Grantor shall have the right to decide the use and renewal of the line according
to the settlement conditions of the Fiduciary. |
This Supplementary Agreement shall be supplementary
provisions to the Maximum Comprehensive Credit Contract (Contract No.: SX161214000369) and shall have the same equal legal
force with the Maximum Comprehensive Credit Contract. In case of any discrepancy between these supplementary provisions
and the Contract, these supplementary provisions shall prevail, and the other clauses shall remain unchanged.
Fiduciary (Official Seal): |
Credit Grantor (Official Seal): |
|
|
SPRING POWER TECHNOLOGY |
BANK OF JIANGSU SHENZHEN |
|
|
(SHENZHEN) COMPANY LIMITED (SEAL) |
BRANCH (SEAL) |
|
|
Legal Representative or |
Legal Representative or |
|
|
Authorized Representative |
Authorized Representative |
|
|
Oct. 28, 2014 |
Oct. 28, 2014 |
Exhibit 10.5(a)
Maximum Amount Personal Joint Responsibility
Guarantee
NO. BZ161214000048
To: Bank of Jiangsu, Shenzhen Sub-branch
To ensure the performance of Creditor’s
right under the Article 1 of the master contract, the guarantor agrees to provide joint responsibility and promises as follows:
Article 1 The master contract
The master contract is A:
A. “Maximum Amount Comprehensive
Credit Line Contract” signed by bank and debtor Springpower Technology (Shenzhen) Co., Ltd, and the contract number is
“SX 161214000369”
Article 2 The guaranteed creditor’s right
and period
Except the period determined in accordance with
the law or contract, the debt under the master contract makes the guaranteed creditor’s right during the following
period:
The period of Maximum Amount Comprehensive Credit
Line Contract in Article 1
Aforesaid period indicates the date of occurrence,
and does not limit the date of expiration.
Article 3 Guarantee Covers
The guarantee coverage: the principal and interest
(including punitive interest and compound interest) of all loans (credit) outstanding between debtor and Creditor according to
the master contract, the punitive sum that debtor should pay to Creditor; compensation and other expenses Creditor charges for
realizing its creditor’s rights (including but not limited legal fees, arbitration fees, property preservation fees, execution
fees, valuation fees, auction fees, attorneys’ fees, travelling fees, etc.).
Article 4 Guaranty Method
Guarantor voluntarily provides the joint liability
guarantee, when debtor does not perform its obligations related to the debt according to the master contract, no matter what other
guarantee Creditor has for ensuring the creditor’s rights under the master contract (including but not limited to guarantees,
mortgages, pledges, etc.), Creditor has the right to ask guarantor to take guarantee responsibilities within guarantee coverage.
Article 5 Maximum amount of the guaranty
The maximum amount which the guarantee assumed
hereunder is at most no more than RMB ten million only. The maximum amount of guaranty hereon is the loan principal balance by
total amount (meaning the line of credit deducting the amount of cash deposit) of use of loans and facility actually under the
master contract signed between creditor and debtor and in the period as mentioned in the contract deducting amounts repaid, excluding
the proceeds of payable except the principal stipulated in article 3, such as interest expenses and penalties, etc., but the guarantee
shall still assume the joint liquidated liability.
The guarantor agrees that the debtor can recycle
the loans under master contract, and agrees that the debtor can adjust the credit line of all kinds of loans within the line of
credit hereunder, and the guarantor shall assume the joint guarantee liability.
Article 6 Warranty Period
The warranty period of this contract is from the
effective date of this contract to 2 years after the maturity date of the debts (including deferred loans) under master contract.
Article 7 Changes of Master contract
The warranty obligations of this contract will
not be affected by any changes (including but not limited to modifying, supplying and deleting etc.) of the master contract agreed
by creditor and debtor except the amount of the loan. If creditor and debtor agree with delaying to repay the debt, this contract
is still effective.
Creditor may transfer its creditor’s right
to a third party legally, and guarantor shall assume the same warranty responsibilities as before.
Article 8 Independence of this guarantee
This guarantee is independent of the master contract
,the effectiveness of this guarantee is not affected if the master contract is invalid completely or partly. If the master contract
is considered as invalid, guarantor assumes joint security responsibility to the debt resulting from debtor’s returned property
or pay for the damage. Guarantor promises to supervise debtor’s use the loan (credit), and if debtor changes the purpose
of the loan (credit), guarantor still assumes warranty responsibility.
Any tolerance, extension, privilege or delay from
creditor to guarantor for exercising of its rights under this contract does not affect, injure and limit the rights creditor enjoys
according to this contract and laws and regulations, and cannot be considered as the abdication of the related right according
this contract, and will not affect the obligations of guarantor under this contract.
The efficacy of this guarantee will not be affected
by any contract, agreement, and guarantee, and tacit agreement, or dispute.
Warranty obligations of guarantor (including the
inheritor, assignee and conservator of guarantor) are continuous, and have no effect on any change of guarantor and debtor (including
but not limited in division, merger, reorganization, transactions of property right and operational right). If debtor’s subject
qualification ceases to exist before debtor repays all debt to creditor, or creditor announces its subject qualification ceases
to exist within 6 months since debtor repaid all debt result in the foregoing repayment become invalid, the warranty obligations
under this contract are still effective.
Article 9 Guaranty
Guarantor agrees to assume warranty responsibility
by all his property (including family possessions; since the date of signing this guarantee, guarantor will not allowed to dispose
the above property without Creditor’s consent, if Creditor thinks it is necessary that the above property can be guaranteed,
mortgaged or pledged, guarantor promise to assist to process above procedures.
During the warranty period, guarantor promises
that he will not provide guarantee which exceeds his warranty ability to a third party. If the above property is insufficient to
afford the guarantee responsibility, guarantor promises to assume repayment responsibility for the insufficient part.
If Creditor feels necessary, guarantor agrees
to provide the list of all his assets, and evaluate the assets on the list, guarantor will pay any valuation fee. Guarantor promises
that he enjoys ownership and the right of disposal of all assets on the list.
Article 10 Advanced Guarantee Responsibilities
During the warranty period, when any default under
master contract or other situations which is considered as can affect the realization of creditor’s right by Creditor happen,
Creditor can announce the debt immediately due and payable, and has the right to ask the guarantor to assume security responsibility
on the date announced by Creditor, guarantor agrees to assume the security responsibility as Creditor requested.
Article 11 Receiving Payables
Creditor has the right to take payment from guarantor’s
account in bank of Jiangsu for all payables of guarantor in the range of warranty coverage. If the payment is foreign currency,
it will be calculated according to the rate Creditor announced on the day.
Article 12 Other Items
1. During warranty period, Creditor has the right
to supervise the funds and financial condition of guarantor, and guarantor should provide true information.
2. Guarantor authorizes the Creditor to claim
for creditor’s due right, the money collected should be repaid Creditor to the Creditor as priority.
3. If the loan, which is under the master contract
or a specific credit business of the master contract, is not paid as agreed, or is changed the way of payment, guarantor shall
still assume security responsibility.
Article 13 Settlement of Dispute
When there is any dispute in performing the contract,
both parties should settle the dispute through negotiations at first, if negotiations cannot reach an agreement, both parties can
apply to the local people’s court of Creditor.
During the litigation or arbitration period, the
items of this contract which are not involved in the dispute still should be performed.
Article 14 Becoming Effective
This guarantee comes into force as of being signed
by guarantor
Article 15 Statements
1. Guarantor knows the business scope and limits
of authority of Creditor.
2 The guarantor has read the contract comprehensively
and carefully and fully understands the master contract entered into between creditor and debtor, upon the request of guarantor,
the creditor has made the terms interpretation accordingly as for the master contract and the contract hereunder, and the guarantor
is fully aware of and understands all the terms of the master contract and the contract hereunder, and signed this contract with
willingly. The guarantor is fully aware of the legal consequences for the conclusion and performance of the master contract and
the contract hereunder may give rise to, and fully confirms the obligations related to this contract.
3. Guarantor has the right to sign this guarantee.
4. Guarantor should give the consent that, Creditor
might somehow authorize other affiliated institution of Jiangsu bank to perform the obligation. The performing party entitles all
the rights and obligations under this contract and the affiliated credit line contracts, the performing party reserves the rights
to appeal a resolution of dispute if necessary.
5. It should be noticed to Creditor in writing
of any changes of guarantor’s abode, postal address, contact number etc. in 10 days after the changes happen. It will be
considered as if the information has been delivered if Creditor sends related notices and documents according to the primary address
on file if the guarantor does not provide such notice.
6. If a notary agency mandates enforceable status
to this contract, guarantor agrees to be enforced by the legislative body and gives up the right of defense.
Guarantor (signature): |
/s/ Dangyu Pan |
Exhibit 10.5(b)
Maximum Amount Guaranty Contract
Contract No.: BZ161214000050
Guarantor: Icon Energy System Company Limited
Address: Block A, 4/F, Jinmeiwei Industrial
Park, Guanlan Hi-tech Industrial Park,
Shangkeng Community, Guanlan Town, Baoan District,
Shenzhen
Creditor: Bank of Jiangsu, Shenzhen Sub-branch.
Address: 4011, Shennan Road, Futian District,
Shenzhen.
In order to warranty the performance of debts
under item one of this contract, the guarantor provides the warranty to the creditor voluntarily, and the two parties entered into
this contract after equal negotiation.
Article 1: Master contract
The master contract hereunder is A .
A. The creditor and the debtor Springpower
Technology (Shenzhen) Company Limited entered into this contract of maximum amount comprehensive credit line whose
number is SX 161214000369, and has or will enter into the separate facility business contract, as well as amendments
and supplements.
B. The creditor and the debtor ,
from year month day to year month day
, entered into the contracts of loans, bank acceptance drafts, trade financing, letter of guarantee, funds business, and other
agreement, as well as amendments and supplements.
Article 2: Primary credit and period
Except the period determined or agreed separately
in accordance with the laws, the actual credit under the master contract consists of the primary credit of the contract in the
below period: A .
A. From the effective date of “maximum
amount comprehensive credit line contract” in article one to the expiration date of facility period stipulated in this contract
and amendments or supplements.
B. From ___ year __ month ___ day __ to __
year __ month __ day under article one of this contract.
Article 3: Guarantee Coverage
The scope of guaranty of creditor hereunder
covers all debts occurred under this contract by the debtor, including but not limited to principals, interest expenses, compounded
interests, penalties, processing fees, default expenses, damage compensation, legal fees, escrow fees, taxation expenses, arbitration
fees, travel fees, assessment fees, auction fees, property preservation fees, compulsory execution fees and other expenses for
realization of the creditor’s right.
Article 4: Maximum amount of the guaranty
The maximum amount which the guarantee assumed
hereunder is at most no more than RMB 10 million only. The maximum amount of guaranty hereon is loan principal balance
by total amount (means line of credit deducting the part of cash deposit) of use of loans and facility actually under the master
contract signed between creditor and debtor and in the period as mentioned in the contract deducting the part of repayment, excluding
the proceeds of payable except the principals stipulated in article 3, such as interest expenses and penalties, etc., but the guarantee
shall still assume the joint liquidated liability.
The guarantor agrees that the debtor can recycle
the loans under master contract, and agrees that the debtor can adjust the credit line of all kinds of loans within the line of
credit hereunder, and the guarantor shall assume the joint guarantee liability.
Article 5: The guarantor has read the
contract comprehensively and carefully and fully understands the master contract entered into between creditor and debtor, upon
the request of guarantor, the creditor has made the terms interpretation accordingly as for the master contract and the contract
hereunder, and the guarantor are fully aware of and understands the whole terms content of master contract and the contract hereunder,
and signed this contract with true willing. The guarantor is fully aware of the legal consequence for the conclusion and performance
of the master contract and the contract hereunder may give rise to, and fully confirms the obligations related to this contract.
Article 6: The guarantor shall assume
the responsibilities for all debts owed by the debtor to the creditor under the master contract, including the debts arising from
the prepayment requested by the creditor. After received the written notice sent by creditor, the guarantor shall perform the settlement
responsibilities according to the time, kinds of currency, amount, and method of settlement specified by the creditor, and commit
to the creditor that the creditor has the right to deduct all amount of guaranty from the guarantor’s account when the creditor
deems appropriate, if the deducted proceeds is foreign currency, the currency shall be calculated according to the bid price published
by the creditor at the deducted date.
Article 7: The guarantee obligation
of the guarantor (including the inheritor, assignee, and conservator of the guarantor) need continuity under this contract, shall
not affected by the change of the guarantor or the debtor (including but not limited to merger, split, recombination, conduct
title transaction or transactions of managerial authority by way of lease, contract, and so on). If the debtor’s subject
qualification ceases to exist before clear off the loans hereunder, or the debtor declares that its subject qualification cease
within six month from the date clear off all of loans leading to its foregoing repayment activity invalid, the guarantor’s
warranty obligations is still effective.
Article 8: The term of the guaranty
hereunder is from the date of effective to two years after expiration of the debts hereunder (including the maturity of extension
period).
Article 9: The guaranty obligations
under this contract shall not subject to be affected by any change for the terms and conditions of master contract agreed by both
creditor and debtor (including but not limited to amendments, supplements, and cancellations). If the creditor and debtor agree
to extension or delay the performance of the obligations hereunder, the contract hereunder shall continue to be valid.
In the event of the creditor transfers its
credit right to others in the period of guaranty according to the law, the guarantor continues to assume the guaranty responsibility
within the scope of the guaranty.
Article 10: The guarantor makes the
following commitment to the creditor unconditionally and irrevocably: if the debtor fails to or delays to fulfill the obligations
of master contract, or confirm the invalidity of the master contract in certain reason, or due to the guarantor fails to or delays
to perform any clause hereunder leading to a loss to the creditor, all of above shall be a debt payable for the guarantor to the
creditor.
Article 11: Whatever reasons leading
to the master contract invalid in law or part of terms invalid, the guarantor shall still assume the guaranty responsibility for
the debtor’s repayment liability in accordance with the terms listed hereunder. The guarantor pledge to monitor the debtor
to use the loans (facility), in the event of the debtor change the purpose of the loan, the guarantor shall still assume the guaranty
responsibilities.
Any tolerance, grace or postpone the exercise
of any right preferential by the creditor to the guarantor under this contract, shall not affect, damage, or restrict the creditor’s
all rights in accordance with the contract hereunder, laws and regulations, and normative documents, shall not deem as give up
the rights and benefit under this contract, and shall not affect any obligations assumed by the guarantor under this contract.
Article 12: If there is any collateral
security except this guarantee under this contract, the guarantor is willing to perform the joint guaranty responsibility prior
to collateral security on all guaranty debts.
Article 13: The guarantor is an entity
established in accordance with the laws, is qualified to identify the contract hereunder and perform joint guaranty responsibility.
In addition, signing this contract has obtained empowerment thereof, and the process of performing the contract has been completed.
Article 14: The guarantor to sign and
perform this contract is its real intension, is true and effective and legal, shall not affected by any relationship of any party
hereunder and others or other any events.
Article 15: The debts hereunder has
the equal position with guarantor’s other debts, shall be in the same compensation sequence.
Article 16: If the guarantor enters
into the counter guarantee contract with the debtor upon this contract, this counter guarantee contract shall not damage the creditor’s
any interests, and when the guarantor’s compensation arising from the counter guarantee contract and the creditor’s
claim are in the same sequence, the creditor shall be compensated prior to the guarantor.
The guarantor shall not request the debtor
to set up a counter guarantee by way of property pledge as to the obligations assumed by the debtor hereunder.
Article 17: The guarantor’s responsibility
shall decrease gradually with the decrease of the debts hereunder.
Article 18: The guarantor shall provide
the true, complete, valid financial statement and other relevant materials and information as required by the creditor.
Article 19: In the event of guarantor
change residence, mailing address, telephone number, the scope of business, and the legal representative, shall notice the creditor
in written within 10 days from the date of change events occurred.
Article 10: If notary organ grant enforceable
potency to this contract, guarantor agrees to be enforced and gives up the right of defense.
Article 21: The application of laws and
resolution of dispute
The signing, effectiveness, interpretation,
performance and settlement of disputes of this contract shall apply for the People's Republic of China's laws. If there are any
disputes based on this agreement, the contracting parties could attempt to resolve them through consultation. If negotiation fails,
shall resolve the disputes according to the following way of A :
A. Institute legal proceeding to the court
where the creditor located.
B.
Article 22: This contract and any modifications
and supplement of it enter into force upon the date when it is signed or sealed and affixed with official seals by the legal representative
or entrusted agents of both parties.
Article 23: Other items appointed by both
parties.
The things which are not mentioned in this
contract should be explained and settled according to relevant laws, administrative laws and regulations, normative documents and
the related regulations of Bank of Jiangsu.
Article 24: This agreement is in triplicate,
Party A has one copy, Party B has two copies, three copies have the same legal effect.
Guarantor (stamp): /s/ [COMPANY SEAL]
Legal representative or agent:
Creditor (stamp): /s/ [COMPANY SEAL]
Legal Representative or agent:
Exhibit 10.6
SHEN ZHEN BAO AN GUIYIN COUNTY BANK
Credit Line Contract
Contract No.: 70002020140231
Credit Line Contract
Contract No.: 70002020140231
Credit Receiver (Party A): Springpower
Technology (Shenzhen) Company Limited
Address: Workshop Building A, Shunchao
Industrial Zone, Renmin Road, Danhu Community, Guanlan Street, Bao’an District
Legal Representative (Principal): Pan
Dangyu
Tel.: 13510066248
Credit Grantor (Party B): SHEN ZHEN BAO
AN GUIYIN COUNTY BANK LONGHUA BRANCH
Address: 2/F, Shangyou Residence, ShangYouSong,
East Gongye Road, Longhua New Area
Legal Representative (Principal): Bai
Yiming
Tel.: 15013856373
Whereas Party A applies to Party B for
a credit line and Party B agrees to provide Party A with a credit line, IN WITNESS WHEREOF, in accordance with relevant laws, rules
and regulations, Party A and Party B make and enter into this Contract upon unanimity through consultation between both parties,
and both parties shall commonly abide by and execute this Contract.
Article 1 Credit Variety
Party B shall provide Party A with a
credit product Banker's Acceptance Bill Credit Line.
Article 2 Credit Line
The credit line that Party B provides
Party A shall be RMB (amount in words) Twenty-Nine Million Yuan Only.
The term “credit line” referred
to in this Contract means the limit of the principal balance of RMB credit product that Party B provides Party A during the valid
period of the credit line specified herein. During the valid period of the credit line, Party A may recycle the credit line. As
long as the unpaid principal balance of the credit product under this Contract does not exceed the credit line, Party A may continuously
apply for use of the credit line no matter how many times of application and how much is the amount applied each time. However,
the sum of the amount of the credit product applied by Party A and the unpaid principal balance of the credit product under this
Contract shall not exceed the credit line.
Article 3 Credit Period
The credit period shall be from November
19, 2014 to November 18, 2015.
When the credit period expires, the credit
line which has not used shall become invalid automatically.
Banker’s Acceptance Bill Credit
Period means the period for issuing a draft (in other words, the time limit for issuing a draft shall not exceed the credit period,
but the valid period of related guarantee must cover the entire duration of the draft). The credit period of other credit businesses
refers to the maturity period (in other words, the date of maturity of the business shall not exceed the credit period).
Article 4 Use of Credit
1. During the valid credit period and
within the credit line, Party A may apply for use of the credit product hereunder trade by trade according to Party A’s needs.
Both parties shall make and enter into a relevant contract and go through relevant formalities.
2. Preconditions for Use of Credit
As long as the following preconditions
have been satisfied, Party B shall have the obligation to provide Party A with the credit product hereunder, except otherwise wholly
or partly waived by Party B:
(1) Both parties have completed relevant
legal procedures in connection with the execution of this Contract, including approval, registration, delivery and others in accordance
with relevant laws and regulations;
(2) A guarantee contract in compliance
with Party B’s requirements has become effective and shall remain in force;
(3) There is no breach under this Contract;
and
(4) Other preconditions agreed by both
parties:
1. / ;
2. / ;
3. / .
Article 5 Credit Guarantee
The following (1) shall be adopted
as the guarantee method:
(1) Guarantee. Shenzhen Highpower
Technology Co., Ltd. Pan Dangyu shall provide guarantee as the guarantor under this Contract and a Guarantee Contract
shall be concluded and signed separately.
(2) Mortgage. The property provided by
/ shall be taken as the mortgage guarantee and a Mortgage Contract shall be concluded and signed separately.
(3) Pledge. The property provided by
/ shall be taken as the pledge guarantee and a Pledge Contract shall be concluded and signed separately.
(4) Others: /
Article 6 Rights and Obligations of Party
A
1. Party A shall have the right to request
Party B to keep confidential the relevant financial materials and business secrets about production and operation provided by Party
A, except otherwise prescribed by laws, rules and regulations.
2. Party A must, according to the requirements
of Party B, provide the materials of its financial conditions and production and operation conditions. Party A shall ensure the
genuine, completeness and effectiveness of the materials provided by Party A.
3. Party A shall, according to the stipulations
of this Contract, repay Party B the principal and interest of the credit funds and pay Party B the relevant expenses on time and
in full. Party A shall make settlement and deposit service of capital transactions hereunder through the account opened by Party
A with Party B or a branch of Party B.
4. Party A shall actively coordinate
and consciously accept Party B’s inspection and supervision on its production, operation and financial activities and the
use conditions of the credit product under this Contract.
5. Party A shall use the credit line
for the purpose designated by both parties.
6. Party A and Party A’s investors
shall not escape its debts to Party B by means of drawing out capital or transferring assets, nor divestiture the bank’s
funds or credit by discounting or pledging in a bank the notes receivable and accounts receivable without actual trading background
by use of a false contract with affiliated parties.
7. During the valid period of this Contract,
if Party A provides security for others’ debts, which may affect its repayment capacity of debts, Party A shall offer a written
notice to Party B and obtain Party B’s consent in advance.
8. During the valid period of this Contract,
if Party A has any change which is enough to affect the realization of the creditor’s rights of Party B, such as contract
operation, custody (administration), lease, joint-stock reform, decrease of registered capital, investment, joint operation, consolidation,
merger, acquisition and restructuring, division, equity joint venture, equity transfer, substantial increase of debt financing,
(being filed or) filing for winding-up, filing for dissolution, being revoked, (being filed or) filing for bankruptcy, change of
controlling shareholder/actual controller or major asset transfer, Party A shall obtain Party B’s prior written consent and
implement repayment and guarantee of the debt hereunder according to Party B’s requirements. However, Party B’s written
consent shall not affect Party B’s right to take remedy measures specified in this Contract when Party B thinks the abovementioned
acts may endanger the creditor’s rights of Party B.
During the valid period of this Contract,
if Party A has any change which may have significant adverse impact on Party A’s performance of repayment obligation under
this Contract, such as production stoppage, operation suspension, being cancelled from registration, legal representative or main
principal’s engagement in illegal activities, involvement in material litigation activities, serious difficulty in production
and operation, or deterioration of financial conditions, decline of credit status, inability of the legal representative or the
principal to perform his/her duties normally, Party A shall give a prior notice to Party B in writing and implement repayment and
guarantee of the debt hereunder according to Party B’s requirements.
9. The expenses for attorney service,
insurance, evaluation, registration, custody, appraisal and notarization under this Contract and in connection with the guarantee
hereunder, and all the expenses of Party A for realization of creditor’s rights (including but not limited to legal cost,
arbitration fee, property preservation cost, business traveling expenses, execution fee and attorney fee) shall be borne by Party
A.
Article 7 Rights and Obligations of Party
B
1. Party B shall have the right to understand
Party A’s production, operation and financial activities and to request Party A to provide the materials of financial conditions
and production and operation conditions.
2. If Party A’s credit rating is
declined or has any one of the following significant issues, Party B shall have the right to adjust until cancel the credit line:
(1) major construction project with the
total investment in excess of the sum of three years’ after-tax profits prior to investment;
(2) major system reform, such as merger,
acquisition, division, bankruptcy, shareholding reform and asset reorganization;
(3) major lawsuit under which the litigation
object reaches over 30% (included) of the net assets;
(4) external guarantee with the external
guarantee amount reaches over 30% (included) of the net assets;
(5) significant personnel adjustment;
(6) major accident and other major events
involved a large amount of compensation;
(7) delay in repayment of loan, overdue
interest or other situations causing forced advance money paid by Party B.
3. Party B is entitled to deduct the
funds payable by Party A to Party B hereunder from any account opened by Party A with Party B’s system.
4. Party B shall provide Party A with
use of the credit product on time and in full according to the stipulations of this Contract, except otherwise delayed due to causes
attributable to Party A.
5. Party B shall keep confidential the
relevant financial materials and business secrets about production and operation provided by Party A, except otherwise prescribed
by laws, rules and regulations.
Article 8 Liability for Breach of Contract
1. Breach
(1) Party A’s breach:
1. Party A has any breach under this
Contract or has any violation of its legal obligations;
2. Party A expressly indicates or indicates
by act that Party A will not perform any obligation under this Contract;
3. Party A’s all or any other debts
have affected or may affect Party B to perform its obligations under this Contract.
(2) If Party A fails to provide new security
as required by Party B under any one of the following circumstances of the guarantor, Party A shall be deemed as having conducted
an event of default:
1. The guarantor violates any item specified
or presented and warranted in the guarantee contract, resulting in any existing falsehood, error or omission;
2. The guarantor has any change which
may affect the guarantor to assume guarantee liability, such as contract operation, custody (administration), lease, joint-stock
reform, decrease of registered capital, investment, joint operation, consolidation, merger, acquisition and restructuring, division,
equity joint venture, equity transfer, substantial increase of debt financing, (being filed or) filing for winding-up, filing for
dissolution, being revoked, (being filed or) filing for bankruptcy, change of controlling shareholder/actual controller, or major
asset transfer, production stoppage, operation suspension, huge penalty imposed by the authorized authority, being cancelled from
registration, revocation of business license, involvement in material legal disputes, serious difficulty in production and operation,
or deterioration of financial position, decline of credit status, inability of the legal representative or the principal to perform
his/her duties normally;
3. The guarantor loses or may lose its
guarantee capability.
(3) If Party A fails to provide new security
as required by Party B under any one of the following circumstances of the mortgagor, Party A shall be deemed as having conducted
an event of default:
1. The mortgagor fails to cover property
insurance for the mortgage according to Party B’s requirements, or in an insurance accident, the Mortgagor fails to deal
with insurance compensation pursuant to the mortgage contract;
2. In case of damage, loss or devaluation
of the mortgage due to a third party's behavior, the mortgagor fails to deal with damages pursuant to the mortgage contract;
3. Without Party B’s written consent,
the mortgagor transfers, leases, repeats mortgage or disposes the mortgage by other means;
4. The mortgagor disposes the mortgage
upon Party B’s consent but fails to deal with the incomes from disposal of the mortgage pursuant to the mortgage contract;
5. In case of damage, loss or devaluation
of the mortgage, affecting repayment of the debts under this Contract, the mortgager fails to timely recover the mortgage’s
value or fails to provide other security accepted by Party B; or
6. Other breach circumstances of the
Mortgagor prescribed in the mortgage contract.
(4) If Party A fails to provide new security
as required by Party B under any one of the following circumstances of the pledgor, Party A shall be deemed as having conducted
an event of default:
1. The pledgor fails to cover property
insurance for the pledge according to Party B’s requirements, or in an insurance accident, the pledgor fails to deal with
insurance compensation pursuant to the pledge contract;
2. The pledgor disposes the pledged property
upon Party B’s consent but fails to deal with the incomes from disposal of the pledged property pursuant to the pledge contract;
3. In case of devaluation of the pledged
property, affecting repayment of the debts under this Contract, the pledgor fails to timely recover the value of the pledged property
or fails to provide other guarantee accepted by Party B;
4. Other breach circumstances of the
pledgor prescribed in the pledge contract.
(5) In case of ineffectiveness, invalidity
or cancellation of the security contract or other security method, or the Guarantor’s loss of security capacity partly or
wholly, or the Guarantor’s refusal to perform the obligation for security, Party A shall be deemed as having conducted an
event of default if Party A fails to implement new guarantee according to Party B’s requirements.
2. Remedy measures for breach
Under any one of the aforesaid events
of default, Party B shall be entitled to exercise one or several of the following rights:
(1) to adjust, cancel or terminate the
credit line, or to adjust the valid period of the credit line;
(2) to stop Party A’s use of the
credit product under this Contract; to announce immediate maturity of the credit; to request Party A to immediately repay the loan
principal, interest and other expenses under this Contract.
(3) to charge 0.5‰ of the
principal balance of the credit product under this Contract from Party A as penalty.
(4) if Party A fails to use the credit
for the purpose specified in this Contract, to calculate and charge default interest for the part diverted by Party A according
to relevant stipulations of the People’s Bank of China;
(5) to deduct the funds payable by Party
A to Party B hereunder from any account opened by Party A with Party B’s system.
(6) to exercise the right of guarantee.
(7) to ask Party A to re-provide the
guarantee recognized by Party B.
(8) to cancel this Contract.
Article 9 Change of Contract
The party which needs to change the contents
of this Contract after this Contract becomes effective shall notify the other party timely. Upon unanimity through consultation
between both parties, a written agreement shall be concluded and signed, unless otherwise specified in this Contract or agreed
by both parties out of this Contract.
Article 10 Other Provisions
1. Affiliated party
If Party A is a group client, Party A
shall timely, comprehensively and accurately notify Party B of Party A’s affiliated party relationship and affiliated transactions.
If Party A does not perform the aforesaid obligation of information disclosure, or the borrower or its affiliated party has any
one of the following situations, which may adversely affect Party A’s performance of its obligations under this Contract,
Party B shall have the right to take remedy measures specified in this Contract and prescribed by law:
(1) The financial conditions of Party
A’s affiliated party are worse;
(2) Party A or its affiliated party is
investigated and prosecuted or punished by law by an administrative organ for law enforcement and an executive authority, such
as a judicial organization, tax authority or industrial and commercial bureau;
(3) the relationship of control or being
controlled between Party A and its affiliated party changes;
(4) Party A’s affiliated party
is involved in or may be involved in material economic dispute, litigation or arbitration;
(5) the main individual investor or key
managerial person of Party A changes abnormally or is suspected of being involved in criminal acts so that the judicial organization
carries out investigation by law or restricts the personal freedom;
(6) Other matters of Party A’s
affiliated party, which will cause adverse impact on Party A.
In accordance with the Accounting
Standards for Enterprises – Relationship between Affiliated Parties and Disclosure of Transactions among Them, the term
“affiliated party” referred to herein means:
(1) Other enterprises under direct or
indirect control of Party A, or other enterprises which directly or indirectly control Party A, and other enterprises under the
control of the same parent company of Party A;
(2) The joint ventures of Party A;
(3) The associated enterprises of Party
A;
(4) Party A’s main individual investors,
key managerial personnel or the close family members thereof;
(5) Other enterprises under direct control
of Party A’s main individual investors, key managerial personnel or the close family members thereof;
Other terms and expressions referred
to herein shall have the same meanings as defined in the Accounting Standards for Enterprises – Relationship between Affiliated
Parties and Disclosure of Transactions among Them.
2. / .
3. / .
4. /
Article 11 Settlement of Contract Disputes
Any and all disputes during the execution
process of this Contract may be settled through consultation between both parties. Where consultation fails, a lawsuit may be commenced
in the people’s court at the location where Party B is located.
During the litigation period, the other
clauses of the Contract not in dispute shall remain valid.
Article 12 Effectiveness of Contract
This Contract shall come into force when
Party A and Party B’s legal representatives (principals) or authorized agents give their signatures (seals) herein and both
parties affix their official seals herein.
Article 13 Contract Text
This Contract has been made out in four
(4) originals for Party A and Party B each holding two (2), which shall be equally authentic.
During the valid credit period and within
the credit line, all the legal documents concerning the creditor and debtor relationship between Party A and Party B shall be deemed
as an integral part of this Contract.
Article 14 Declaration
1. Party A clearly understands the business
scope and limit of authorization of Party B.
2. Party A has read through all the terms
hereunder. At Party A’s request, Party B has explained the terms hereunder accordingly. Party A has full knowledge and thorough
understanding of the meaning of the terms hereunder and the legal consequences thereof.
3. Party A’s signature and performance
of obligations under this Contract comply with laws, administrative regulations, rules and Party A’s articles of association
or internal organization documents, and Party A has been approved by its internal competent organizations and / or relevant state
authorities.
4. Party A and its controlling shareholder
have good credit status but have no significant bad record.
(The remainder of this page is intentionally
left blank.)
Party A (Official Seal):
Springpower Technology (Shenzhen)
Company
Limited (Seal)
Legal Representative: Pan Dangyu (Seal)
(or Authorized Agent)
Nov. 11, 2014 |
|
Party B (Official Seal):
SHEN ZHEN BAO AN GUIYIN COUNTY
BANK
LONGHUA BRANCH (Seal)
Legal Representative: Bai Yiming (Seal)
(or Authorized Agent)
Nov. 11, 2014 |
Exhibit 10.6(a)
SHEN ZHEN BAO AN GUIYIN COUNTY BANK
Maximum Guarantee Contract
Contract No.: 70002020140231-1
Maximum Guarantee Contract
Contract No.: 70002020140231-1
Guarantor (Party A): Pan Dangyu
Legal Representative (Principal):
Address: Bldg. 1, No. 68, Xinsha Road, Pinghu
Street, Longgang District, Shenzhen
Tel.: 13510066248
Creditor (Party B): SHEN ZHEN BAO AN GUIYIN
COUNTY BANK LONGHUA BRANCH
Legal Representative (Principal): Bai Yiming
Address: 2/F, Shangyou Residence, ShangYouSong,
East Gongye Road, Longhua New Area
Tel.: 15013856373
In order to ensure performance of the debt
specified in Article 1 of this Contract, Party A is willing to provide joint guarantee liability for Party B. IN WITNESS WHEREOF,
Party A and Party B make and enter into this Contract through equal consultation and both parties shall commonly abide by this
Contract. When this Contract is concluded, Party B has explained and introduced all the terms and conditions of this Contract to
Party A, and Party A has had complete awareness and understanding of the contents of this Contract.
Article 1 Master Contract
The Master Contract of this Contract is (1).
(1) The Credit Line Contract of No.
70002020140231 made and entered into by and between Party B and the Debtor Springpower Technology (Shenzhen) Company Limited,
and the single agreements having been concluded and to be concluded on the basis of the Credit Line Contract and their amendments
or supplementations.
(2) The loan, trade financing, letter of guarantee,
capital business and other credit business contracts (hereinafter referred to collectively as the Single Contract) made and entered
into by and between Party B and the Debtor /
during the period from /
to / ,
and their amendments or supplementations.
Article 2 Principal Creditor’s Right
and Occurrence Period
The creditor’s rights occurring under
the Master Contract shall constitute the principal creditor’s right hereunder during the period of following (1),
except otherwise determined or specified by law:
(1) From the date of effectiveness of the Credit
Line Contract specified in Article 1 herein to the date of expiration of use of the credit line specified in the Credit
Line Contract and their amendments or supplementations.
(2) From /
to /
as specified in Article 2 herein.
Article 3 Maximum Amount of Guaranteed Creditor’s
Rights
1. Balance of the maximum principal of the
creditor’s rights guaranteed hereunder shall be: RMB (amount in words) Twenty-Nine Million Yuan Only (¥29,000,000.00).
2. If the creditor’s right is determined
as the principal creditor’s right guaranteed hereunder on the date of expiration of the principal creditor’s right
as determined in Article 2 herein, the interest (including legal interest, agreed interest, compound interest and default interest)
of the principal of the principal creditor’s right, penalty, liquidated damages, expenses for realization of creditor’s
rights (including but not limited to legal cost, attorney fee, notarization expenses and execution expenses), and losses caused
to Party B due to the Debtor’s breach of contract and other expenses payable shall be the creditor’s rights guaranteed.
The specific amount shall be determined when they are paid off.
The sum of the amounts of the creditor’s
rights as determined in the preceding two paragraphs shall be the maximum amount of guaranteed creditor’s rights under this
Contract.
If the Debtor does not perform his debt according
to the stipulations of the Master Contract, no matter whether Party B has any other guarantee for the creditor’s rights under
the Master Contract (including but not limited to guarantee, mortgage, pledge, letter of guarantee, and standby letter of credit
and so on), Party B shall have the right to directly request Party A to assume guarantee liability within the specific scope of
guarantee.
Article 4 Guarantee Mode
Party A shall provide joint liability of guarantee.
As acknowledged by Party A, if the Debtor fails
to perform his debt according to the stipulations of the relevant contract, Party B shall have the right to directly request Party
A to assume liability of guarantee. Party A shall perform the obligation of repayment within ten (10) working days after
Party A receives a Matured (Overdue) Loan Collection Notice from Party B.
Article 5 Occurrence of Guarantee Liability
Under any one of the following circumstances,
Party B shall have the right to request Party A to perform guarantee liability by law and in accordance with this Contract:
1. The Debtor fails to make repayment to Party
B on the date of regular repayment or on the date of prepayment.
The date of regular repayment mentioned in
the preceding paragraph refers to, as specified in the Master Contract, the date of repayment of principal, the date of payment
of interest, or the date that the Debtor shall pay Party B any funds as specified in the contract. The date of prepayment mentioned
in the preceding paragraph refers to the date of prepayment presented by the Debtor and agreed by Party B and the date that the
Party B requests the Debtor to recover the debt principal and interest and/or any other funds in advance pursuant to the contract.
2. Other circumstances under which Party B
may realize creditor’s rights in advance pursuant to the Master Contract.
In the event that the principal debt has security
or guarantee for other things out of this Contract, which does not affect Party B to exercise any rights under this Contract, Party
A shall not defense Party B hereby.
Article 6 Guaranty Period
1. The guarantee period under this Contract
shall be from the date of effectiveness of this Contract to two years after the date of expiration of the performance period of
the principal debt determined in Article 2 herein.
2. During the guarantee period, Party B shall
have the right to request Party A to assume guarantee liability for a part or all, multiple or single of the principal creditor’s
right collectively or respectively.
Article 7 Rights and Obligations of both Parties
1. Party A’s written consent shall be
obtained for extending the service life of the credit line under the Master Contract or increasing the credit line under the Master
Contract. If without Party A’s consent or refused by Party A, Party A shall assume guarantee liability, within the maximum
amount of guaranteed creditor’s rights as specified in Article 3 herein, for the principal creditor’s right within
the service life of the original credit line.
It is unnecessary to obtain Party A’s
consent for change of other contents or items of the Master Contract. Party A shall continue to assume guarantee liability for
the changed Master Contract within the maximum amount of guaranteed creditor’s rights as specified in Article 3 herein.
The maximum amount of guaranteed creditor’s
rights as specified in Article 3 herein may be changed in written form upon unanimity through consultation between Party A and
Party B.
If Party B entrusts a third party to perform
part or all of Party B’s rights and obligations under the Master Contract or transfers the principal creditor’s right
to a third party by law after this Contract becomes effective, Party B may not obtain Party A’s consent in advance but Party
A shall continue to assume guarantee liability for the third party within the original scope of guarantee.
2. If Party A has any change which may affect
Party A to assume guarantee liability, such as contract operation, custody (administration), lease, joint-stock reform, decrease
of registered capital, investment, joint operation, consolidation, merger, acquisition and restructuring, division, equity joint
venture, equity transfer, substantial increase of debt financing, (being filed or) filing for winding-up, filing for dissolution,
being revoked, (being filed or) filing for bankruptcy, change of controlling shareholder/actual controller, or major asset transfer,
production stoppage, operation suspension, huge penalty imposed by the authorized authority, being cancelled from registration,
revocation of business license, involvement in material legal disputes, serious difficulty in production and operation, or deterioration
of financial position, decline of credit status, inability of the legal representative or the principal to perform his/her duties
normally, Party A shall give a prior notice to Party B in writing and obtain Party B’s written consent in advance. Party
A shall, according to Party B’s requirements, provide Party B with a new guarantee accepted by Party B, and a new guarantee
contract shall be concluded.
3. Without Party B’s written consent,
Party A shall not provide a third party with any other guarantee which may affect the performance of the Guarantee Contract during
the guarantee period.
4. Party B is entitled to supervise Party A’s
capital and financial conditions. Party A shall provide its financial statements and relevant materials truthfully and shall be
responsible for the genuine, completeness and effectiveness of the materials provided by Party A.
5. If Party B announces acceleration of maturity
of debt under the Master Contract, Party B shall have the right to request Party A assume guarantee liability within ten (10) banking
days as of the date of accelerated maturity.
6. The expenses for attorney service, evaluation,
notarization, insurance, appraisal, custody and deposit under this Contract shall be borne by Party A.
7. Party B is entitled to deduct Party A's
all funds payable within the scope of guarantee from an account opened by Party A with any system of Party B.
Article 8 Events of Default and Treatment
Party A shall constitute or be deemed as having
conducted an event of default hereunder if Party A:
1. fails to perform guarantee liability timely
according to the stipulations of this Contract;
2. makes untrue declaration herein or violates
its commitments made herein;
3. violates other provisions for rights and
obligations under this Contract; or
4. has an event of default under any other
contract concluded and signed with Party B.
In case of any event of default prescribed
in the preceding paragraph, Party B shall have the right to take any or all of the following measures according to the actual situations:
1. to ask Party A to correct its breach behavior
within a time limit;
2. to totally or partly suspend or terminate
the acceptance of Party A’s business application under any other contract; to totally or partly suspend or terminate the
offering of a loan not offered and the handling of the trade financing not handled;
3. to announce immediately maturity of all
or any of the principal and interest of the loan not repaid/trade financing funds and other accounts payable under any other contract;
4. to terminate or cancel this Contract, and
terminate or cancel all or part of the other contracts between Party A and Party B;
5. to demand Party A to make compensation for
the losses caused to Party B due to Party A’s breach of contract;
6. other measures that Party B thinks necessary.
Article 9 Other Provisions
1. If Party A is a group client, Party A shall
timely, comprehensively and accurately give a written notice to Party B on the situations of the related transactions involving
over 10% of its net assts, including: (1) the transaction parties’ incidence relation; (2) transaction issues and transaction
nature; (3) transaction amount or corresponding proportion; and (4) pricing policy (including the transactions without an amount
or with a symbolic amount only). If Party A does not perform the aforesaid obligation of information disclosure, or Party A or
its affiliated party has any one of the following situations, which may adversely affect Party A’s performance of its obligations
under this Contract, Party B shall have the right to take remedy measures specified in this Contract and prescribed by law:
(1) the financial conditions of Party A’s
affiliated party are worse;
(2) Party A or its affiliated party is investigated
and prosecuted or punished by law by an administrative organ for law enforcement and an executive authority, such as a judicial
organization, tax authority or industrial and commercial bureau;
(3) the relationship of control or being controlled
between Party A and its affiliated party changes;
(4) Party A’s affiliated party is involved
in or may be involved in material economic dispute, litigation or arbitration;
(5) the main individual investor or key managerial
person of Party A changes abnormally or is suspected of being involved in criminal acts so that the judicial organization carries
out investigation by law or restricts the personal freedom;
(6) Other matters of Party A’s affiliated
party, which will cause adverse impact on Party A.
In accordance with the Accounting Standards
for Enterprises – Relationship between Affiliated Parties and Disclosure of Transactions among Them, the term “affiliated
party” referred to herein means:
1. Other enterprises under direct or indirect
control of Party A, or other enterprises which directly or indirectly control Party A, and other enterprises under the control
of the same parent company of Party A;
2. The joint ventures of Party A;
3. The associated enterprises of Party A;
4. Party A’s main individual investors,
key managerial personnel or the close family members thereof;
5. Other enterprises under direct control of
Party A’s main individual investors, key managerial personnel or the close family members thereof;
Other terms and expressions referred to herein
shall have the same meanings as defined in the Accounting Standards for Enterprises – Relationship between Affiliated
Parties and Disclosure of Transactions among Them.
2. Party A has the obligation to supervise
the use of the loan borrowed by the borrower;
3. /
;
4. / .
5. / .
Article 10 Reservation of Rights
No failure on either party to exercise part
or all rights under this Contract and no failure to require the other party to perform or undertake part or all obligations and
responsibilities under this Contract shall constitute a waiver of the rights or the exemption of the obligations and responsibilities.
Either party’s tolerance of the other
party, extension or delay in exercising any rights under this Contract shall not affect the party to enjoy any right according
to this Contract, and laws and regulations and shall not be deemed as a waiver of the right.
Article 11 Effectiveness, Change, Amendment
and Termination of Contract
1 This Contract shall come into force when
Party A and Party B’s legal representatives (principals) or authorized agents give their signatures or seals herein and both
parties affix their official seals herein.
2 When this Contract comes into force, Party
A and Party B shall not change or cancel this Contract in advance at random. Should this Contract be changed or cancelled, Party
A and Party B shall make and enter into a written agreement upon unanimity through consultation between both parties. Various clauses
of this Contract shall remain in force prior to the conclusion of a written agreement.
3. This Contract shall not be terminated unless
all rights and obligations hereunder have been performed, except otherwise prescribed by laws and regulations or agreed by both
parties.
4. The validity of this Contract shall be independent
of the Master Contract and may not become invalid with the invalidity of the Master Contract. If the Master Contract is confirmed
as invalid, Party A shall assume guarantee liability for the debts arising from the Debtor’s return of properties or compensation
for losses. The invalidity of any provision of this Contract shall not affect the validity of any other provision hereof, except
otherwise prescribed by laws and regulations or agreed by both parties.
Article 12 Applicable Laws and Dispute Settlement
This Contract shall be governed by the laws
of the People's Republic of China.
Any and all disputes arising from the execution
of this Contract may be settled through consultation between both parties. Where consultation fails, a lawsuit may be instituted
in the local court at the location where Party B is located for settlement.
During the litigation period, the other clauses
of this Contract not in dispute shall remain valid.
Article 13 Supplementary Provisions
This Contract has been made out in four
(4) originals for Party A and Party B each holding two (2), which shall be equally authentic.
Article 14 Declaration
1. Party A clearly understands the business
scope and limit of authorization of Party B.
2. Party A has read through all the terms hereunder.
At Party A’s request, Party B has explained the terms hereunder accordingly. Party A has full knowledge and thorough understanding
of the meaning of the terms hereunder and the legal consequences thereof.
3. Party A has the right to sign this Contract.
Party A (Official Seal): |
Party B (Official Seal): |
|
|
|
SHEN ZHEN BAO AN GUIYIN COUNTY |
Pan Dangyu |
BANK LONGHUA BRANCH (Seal) |
|
|
Legal Representative: |
Legal Representative: Bai Yiming (Seal) |
(or Authorized Agent) (Signature) |
(or Authorized Agent) |
|
|
Nov. 11, 2014 |
Nov. 11, 2014 |
Exhibit 10.6(b)
SHEN ZHEN BAO AN GUIYIN COUNTY BANK
Maximum Guarantee Contract
Contract No.: 70002020140231-2
Maximum Guarantee Contract
Contract No.: 70002020140231-2
Guarantor (Party A): Shenzhen Highpower Technology
Co., Ltd.
Legal Representative (Principal): Pan Dangyu
Address: Bldg. 1, No. 68, Xinsha Road, Pinghu
Street, Longgang District, Shenzhen
Tel.: 13510066248
Creditor (Party B): SHEN ZHEN BAO AN GUIYIN
COUNTY BANK LONGHUA BRANCH
Legal Representative (Principal): Bai Yiming
Address: 2/F, Shangyou Residence, ShangYouSong,
East Gongye Road, Longhua New Area
Tel.: 15013856373
In order to ensure performance of the debt
specified in Article 1 of this Contract, Party A is willing to provide joint guarantee liability for Party B. IN WITNESS WHEREOF,
Party A and Party B make and enter into this Contract through equal consultation and both parties shall commonly abide by this
Contract. When this Contract is concluded, Party B has explained and introduced all the terms and conditions of this Contract to
Party A, and Party A has had complete awareness and understanding of the contents of this Contract.
Article 1 Master Contract
The Master Contract of this Contract is (1).
(1) The Credit Line Contract of No.
70002020140231 made and entered into by and between Party B and the Debtor Springpower Technology (Shenzhen) Company Limited,
and the single agreements having been concluded and to be concluded on the basis of the Credit Line Contract and their amendments
or supplementations.
(2) The loan, trade financing, letter of guarantee,
capital business and other credit business contracts (hereinafter referred to collectively as the Single Contract) made and entered
into by and between Party B and the Debtor / during
the period from /
to /
, and their amendments or supplementations.
Article 2 Principal Creditor’s Right
and Occurrence Period
The creditor’s rights occurring under
the Master Contract shall constitute the principal creditor’s right hereunder during the period of following (1),
except otherwise determined or specified by law:
(1) From the date of effectiveness of the Credit
Line Contract specified in Article 1 herein to the date of expiration of use of the credit line specified in the Credit
Line Contract and their amendments or supplementations.
(2) From /
to / as specified in Article 2 herein.
Article 3 Maximum Amount of Guaranteed Creditor’s
Rights
1. Balance of the maximum principal of the
creditor’s rights guaranteed hereunder shall be: RMB (amount in words) Twenty-Nine Million Yuan Only (¥29,000,000.00).
2. If the creditor’s right is determined
as the principal creditor’s right guaranteed hereunder on the date of expiration of the principal creditor’s right
as determined in Article 2 herein, the interest (including legal interest, agreed interest, compound interest and default interest)
of the principal of the principal creditor’s right, penalty, liquidated damages, expenses for realization of creditor’s
rights (including but not limited to legal cost, attorney fee, notarization expenses and execution expenses), and losses caused
to Party B due to the Debtor’s breach of contract and other expenses payable shall be the creditor’s rights guaranteed.
The specific amount shall be determined when they are paid off.
The sum of the amounts of the creditor’s
rights as determined in the preceding two paragraphs shall be the maximum amount of guaranteed creditor’s rights under this
Contract.
If the Debtor does not perform his debt according
to the stipulations of the Master Contract, no matter whether Party B has any other guarantee for the creditor’s rights under
the Master Contract (including but not limited to guarantee, mortgage, pledge, letter of guarantee, and standby letter of credit
and so on), Party B shall have the right to directly request Party A to assume guarantee liability within the specific scope of
guarantee.
Article 4 Guarantee Mode
Party A shall provide joint liability of guarantee.
As acknowledged by Party A, if the Debtor fails
to perform his debt according to the stipulations of the relevant contract, Party B shall have the right to directly request Party
A to assume liability of guarantee. Party A shall perform the obligation of repayment within ten (10) working days after
Party A receives a Matured (Overdue) Loan Collection Notice from Party B.
Article 5 Occurrence of Guarantee Liability
Under any one of the following circumstances,
Party B shall have the right to request Party A to perform guarantee liability by law and in accordance with this Contract:
1. The Debtor fails to make repayment to Party
B on the date of regular repayment or on the date of prepayment.
The date of regular repayment mentioned in
the preceding paragraph refers to, as specified in the Master Contract, the date of repayment of principal, the date of payment
of interest, or the date that the Debtor shall pay Party B any funds as specified in the contract. The date of prepayment mentioned
in the preceding paragraph refers to the date of prepayment presented by the Debtor and agreed by Party B and the date that the
Party B requests the Debtor to recover the debt principal and interest and/or any other funds in advance pursuant to the contract.
2. Other circumstances under which Party B
may realize creditor’s rights in advance pursuant to the Master Contract.
In the event that the principal debt has security
or guarantee for other things out of this Contract, which does not affect Party B to exercise any rights under this Contract, Party
A shall not defense Party B hereby.
Article 6 Guaranty Period
1. The guarantee period under this Contract
shall be from the date of effectiveness of this Contract to two years after the date of expiration of the performance period of
the principal debt determined in Article 2 herein.
2. During the guarantee period, Party B shall
have the right to request Party A to assume guarantee liability for a part or all, multiple or single of the principal creditor’s
right collectively or respectively.
Article 7 Rights and Obligations of both Parties
1. Party A’s written consent shall be
obtained for extending the service life of the credit line under the Master Contract or increasing the credit line under the Master
Contract. If without Party A’s consent or refused by Party A, Party A shall assume guarantee liability, within the maximum
amount of guaranteed creditor’s rights as specified in Article 3 herein, for the principal creditor’s right within
the service life of the original credit line.
It is unnecessary to obtain Party A’s
consent for change of other contents or items of the Master Contract. Party A shall continue to assume guarantee liability for
the changed Master Contract within the maximum amount of guaranteed creditor’s rights as specified in Article 3 herein.
The maximum amount of guaranteed creditor’s
rights as specified in Article 3 herein may be changed in written form upon unanimity through consultation between Party A and
Party B.
If Party B entrusts a third party to perform
part or all of Party B’s rights and obligations under the Master Contract or transfers the principal creditor’s right
to a third party by law after this Contract becomes effective, Party B may not obtain Party A’s consent in advance but Party
A shall continue to assume guarantee liability for the third party within the original scope of guarantee.
2. If Party A has any change which may affect
Party A to assume guarantee liability, such as contract operation, custody (administration), lease, joint-stock reform, decrease
of registered capital, investment, joint operation, consolidation, merger, acquisition and restructuring, division, equity joint
venture, equity transfer, substantial increase of debt financing, (being filed or) filing for winding-up, filing for dissolution,
being revoked, (being filed or) filing for bankruptcy, change of controlling shareholder/actual controller, or major asset transfer,
production stoppage, operation suspension, huge penalty imposed by the authorized authority, being cancelled from registration,
revocation of business license, involvement in material legal disputes, serious difficulty in production and operation, or deterioration
of financial position, decline of credit status, inability of the legal representative or the principal to perform his/her duties
normally, Party A shall give a prior notice to Party B in writing and obtain Party B’s written consent in advance. Party
A shall, according to Party B’s requirements, provide Party B with a new guarantee accepted by Party B, and a new guarantee
contract shall be concluded.
3. Without Party B’s written consent,
Party A shall not provide a third party with any other guarantee which may affect the performance of the Guarantee Contract during
the guarantee period.
4. Party B is entitled to supervise Party A’s
capital and financial conditions. Party A shall provide its financial statements and relevant materials truthfully and shall be
responsible for the genuine, completeness and effectiveness of the materials provided by Party A.
5. If Party B announces acceleration of maturity
of debt under the Master Contract, Party B shall have the right to request Party A assume guarantee liability within ten (10) banking
days as of the date of accelerated maturity.
6. The expenses for attorney service, evaluation,
notarization, insurance, appraisal, custody and deposit under this Contract shall be borne by Party A.
7. Party B is entitled to deduct Party A's
all funds payable within the scope of guarantee from an account opened by Party A with any system of Party B.
Article 8 Events of Default and Treatment
Party A shall constitute or be deemed as having
conducted an event of default hereunder if Party A:
1. fails to perform guarantee liability timely
according to the stipulations of this Contract;
2. makes untrue declaration herein or violates
its commitments made herein;
3. violates other provisions for rights and
obligations under this Contract; or
4. has an event of default under any other
contract concluded and signed with Party B.
In case of any event of default prescribed
in the preceding paragraph, Party B shall have the right to take any or all of the following measures according to the actual situations:
1. to ask Party A to correct its breach behavior
within a time limit;
2. to totally or partly suspend or terminate
the acceptance of Party A’s business application under any other contract; to totally or partly suspend or terminate the
offering of a loan not offered and the handling of the trade financing not handled;
3. to announce immediately maturity of all
or any of the principal and interest of the loan not repaid/trade financing funds and other accounts payable under any other contract;
4. to terminate or cancel this Contract, and
terminate or cancel all or part of the other contracts between Party A and Party B;
5. to demand Party A to make compensation for
the losses caused to Party B due to Party A’s breach of contract;
6. other measures that Party B thinks necessary.
Article 9 Other Provisions
1. If Party A is a group client, Party A shall
timely, comprehensively and accurately give a written notice to Party B on the situations of the related transactions involving
over 10% of its net assts, including: (1) the transaction parties’ incidence relation; (2) transaction issues and transaction
nature; (3) transaction amount or corresponding proportion; and (4) pricing policy (including the transactions without an amount
or with a symbolic amount only). If Party A does not perform the aforesaid obligation of information disclosure, or Party A or
its affiliated party has any one of the following situations, which may adversely affect Party A’s performance of its obligations
under this Contract, Party B shall have the right to take remedy measures specified in this Contract and prescribed by law:
(1) the financial conditions of Party A’s
affiliated party are worse;
(2) Party A or its affiliated party is investigated
and prosecuted or punished by law by an administrative organ for law enforcement and an executive authority, such as a judicial
organization, tax authority or industrial and commercial bureau;
(3) the relationship of control or being controlled
between Party A and its affiliated party changes;
(4) Party A’s affiliated party is involved
in or may be involved in material economic dispute, litigation or arbitration;
(5) the main individual investor or key managerial
person of Party A changes abnormally or is suspected of being involved in criminal acts so that the judicial organization carries
out investigation by law or restricts the personal freedom;
(6) Other matters of Party A’s affiliated
party, which will cause adverse impact on Party A.
In accordance with the Accounting Standards
for Enterprises – Relationship between Affiliated Parties and Disclosure of Transactions among Them, the term “affiliated
party” referred to herein means:
1. Other enterprises under direct or indirect
control of Party A, or other enterprises which directly or indirectly control Party A, and other enterprises under the control
of the same parent company of Party A;
2. The joint ventures of Party A;
3. The associated enterprises of Party A;
4. Party A’s main individual investors,
key managerial personnel or the close family members thereof;
5. Other enterprises under direct control of
Party A’s main individual investors, key managerial personnel or the close family members thereof;
Other terms and expressions referred to herein
shall have the same meanings as defined in the Accounting Standards for Enterprises – Relationship between Affiliated
Parties and Disclosure of Transactions among Them.
2. Party A has the obligation to supervise
the use of the loan borrowed by the borrower;
3. /
;
4. / .
5. /
.
Article 10 Reservation of Rights
No failure on either party to exercise part
or all rights under this Contract and no failure to require the other party to perform or undertake part or all obligations and
responsibilities under this Contract shall constitute a waiver of the rights or the exemption of the obligations and responsibilities.
Either party’s tolerance of the other
party, extension or delay in exercising any rights under this Contract shall not affect the party to enjoy any right according
to this Contract, and laws and regulations and shall not be deemed as a waiver of the right.
Article 11 Effectiveness, Change, Amendment
and Termination of Contract
1 This Contract shall come into force when
Party A and Party B’s legal representatives (principals) or authorized agents give their signatures or seals herein and both
parties affix their official seals herein.
2 When this Contract comes into force, Party
A and Party B shall not change or cancel this Contract in advance at random. Should this Contract be changed or cancelled, Party
A and Party B shall make and enter into a written agreement upon unanimity through consultation between both parties. Various clauses
of this Contract shall remain in force prior to the conclusion of a written agreement.
3. This Contract shall not be terminated unless
all rights and obligations hereunder have been performed, except otherwise prescribed by laws and regulations or agreed by both
parties.
4. The validity of this Contract shall be independent
of the Master Contract and may not become invalid with the invalidity of the Master Contract. If the Master Contract is confirmed
as invalid, Party A shall assume guarantee liability for the debts arising from the Debtor’s return of properties or compensation
for losses. The invalidity of any provision of this Contract shall not affect the validity of any other provision hereof, except
otherwise prescribed by laws and regulations or agreed by both parties.
Article 12 Applicable Laws and Dispute Settlement
This Contract shall be governed by the laws
of the People's Republic of China.
Any and all disputes arising from the execution
of this Contract may be settled through consultation between both parties. Where consultation fails, a lawsuit may be instituted
in the local court at the location where Party B is located for settlement.
During the litigation period, the other clauses
of this Contract not in dispute shall remain valid.
Article 13 Supplementary Provisions
This Contract has been made out in four
(4) originals for Party A and Party B each holding two (2), which shall be equally authentic.
Article 14 Declaration
1. Party A clearly understands the business
scope and limit of authorization of Party B.
2. Party A has read through all the terms hereunder.
At Party A’s request, Party B has explained the terms hereunder accordingly. Party A has full knowledge and thorough understanding
of the meaning of the terms hereunder and the legal consequences thereof.
3. Party A has the right to sign this Contract.
Party A (Official Seal): |
|
Party B (Official Seal): |
Shenzhen Highpower |
|
SHEN ZHEN BAO AN GUIYIN COUNTY |
Technology Co., Ltd. (Seal) |
|
BANK LONGHUA BRANCH (Seal) |
|
|
|
Legal Representative: |
Pan Dangyu |
|
Legal Representative: Bai Yiming (Seal) |
(or Authorized Agent) |
(Signature) |
|
(or Authorized Agent) |
|
|
|
Nov. 11, 2014 |
|
Nov. 11, 2014 |
Exhibit 10.7
Number :40000928-2014(Henggang) No. 0068
Working capital loan contract
Important note: The contract is signed between borrower and
lender according to laws and on equal and willing basis, and all the terms of this contract are true meaning of both sides. In
order to protect the borrower’s legitimate rights and interests, the lender hereby inform the borrower to pay full attention
to all the terms concerning the rights and obligations of both parties , especially the bold parts of the contract.
The lender: Industrial and Commercial Bank of China
Ltd. Shenzhen Henggang Branch
Person in charge: Duoping Yang Contact:
Weifeng Tian
Residence (address): City Center Garden Street shops 101,
201, Henggang Street, Longgang District, Shenzhen
Zip Code: 518115
Tel 0755 -28433033 Fax 0755 -28858699 E-mail: /
Borrower: Shenzhen Highpower Technology
Co., Ltd.
Legal representative: George Pan Contact:
Eric Li
Residence (address): Building A2, Luoshan Industrial, Shanxia,
Pinghu Town, Longgang District, Shenzhen
Person in charge: Dangyu Pan Contact: Jing
Li
Zip Code: 518111
Tel: 0755 -89686236 Fax: 0755-89686819 E-mail:
/
After equal negotiation, both sides agreed to enter into
this particular contract.
The first part Basic
Provisions
Article 1 the use of the loan
The loan Can be used for the below purpose and shouldn’t
be used for any other purposes without written consent of the lender, the lender has the right to monitor the use of funds.
Use of loan: The loan can be used as current funds for production
and operations.
Article 2 the loan amount and duration
2.1 The amount under this contract is RMB16,000,000.00 (RMB
SIXTEEN MILLION ONLY)
2.2 The term under this contract is 12 months from the date
of actual withdrawal (if separate withdrawal, from the date of the first withdrawal), the actual withdrawal date is the date on
IOU.
Article 3 rate, interest and cost
3.1 to determine the RMB loan interest rates
RMB loan interest rates shall be determined according to
the following (3)
(1) Fixed interest rate. Annual interest rate shall be /%
and will not change during the duration.
(2) Floating interest rates. Interest rate shall be determined
by base rate plus floating rate. Base rate is the corresponding base lending rate announced by the People's Bank of China on the
effective date of the contract with underlying term the same as in section 2.2. The floating rate is % of
the base rate, and shall not change within the loan period. After withdrawal, the interest rates shall be adjusted every 6 months.
The date to determine the second period’s interest rate is the corresponding date when the first period ends. If
the corresponding date does not exist, then choose the last day of that month. Interest rate of each withdrawals shall be adjusted
according to .
A, the interest rate for each withdrawal during any six month
period shall be determined according to the rate set at the beginning of the underlying period regardless of the number of withdrawals
and shall be adjusted at the next six month period.
B, Borrowing rates of each withdrawal are determined and
adjusted individually.
(3) Floating interest rates. Interest rate shall be determined
by base rate plus floating rate. Base rate is up 15% of national interbank lending rates, and the rate cannot change during
the period.
3.2 to determine the foreign exchange loan interest
rates Borrowing rates in foreign currency follow the / ways to determine:
(1) Fixed interest rate. Annual interest rate shall be /
and shall not change during the duration.
(2) Floating interest rates, borrowing rates to / months
/ (LIBOR / HIBOR) as the base rate plus / basis points (one basis point to 0.01%) consisting of a floating interest rate spreads.
Contract period plus point spreads remain unchanged. The use of sub-pen drawing and each withdrawal rates were calculated. Borrower
after the withdrawal, following the / ways to adjust the benchmark interest rate, interest-bearing segment:
A, the benchmark interest rate changes in accordance with
the corresponding period. The second phase of the benchmark interest rate adjustment date for a full withdrawal on the corresponding
day after, if you adjust the month and the withdrawal does not exist on the corresponding date, places corresponding to the last
day of the month, day, and so on other phases.
B, the benchmark interest rate changes in the first day of
each Interest Period.
(3) Other: /
3.3 Interest for the borrower under the contract is calculated
on a daily basis from the date of withdrawal and is paid on a monthly basis (month / quarter / half year) interest settlement.
When the loan matures, interest should be settles along with the principal. One day interest rate = interest rate / 360.
3.4 Late penalty rate under the contract is 130% ofthe original
loan interest rate, penalty interest rate for misappropriation of the loan is 150% of the original loan interest rate.
Article 4 withdrawal(This section does not
apply to loan cycles)
4.1Funds should be withdrawn based on the actual needs, the
borrower can make single or multiple withdrawals to the loan amount limit before May 18th 2015.
4.2If the borrower does not withdraw according to the contract,
the lender has the right to cancel all or part of the remaining unused balance.
Article 5 repayment
5.1 Borrower repay the loan under this contract in one single
lump sum.
5.2 If the Borrower prepay the principal in advance, the
borrower should compensate the lender. The compensation should be calculated as: the amount of principle that is prepaid x the
remaining time under the contract (number of months) x 0.1%; the number of months calculated for remaining time should be rounded
to the greater integral number.
Article 6 cycle loan special agreement not
applicable.
Article 7 guarantees
7.1 Loans under the contract are guaranteed, by Hong Kong
Highpower Technology, Springpower Technology (Shenzhen) Co., Ltd. and the legal person, Dangyu Pan 's personal joint responsibility
for promissory guarantee.
7.2 Under the contract, the corresponding
maximum guarantee contracts are the following:
Maximum amount of guarantee contract name: "the maximum
guaranteed contract" (ID: ICBC 40000928-2012henggangbaozi 0053)
Guarantor: Hong Kong Highpower Technology Co., Ltd.
Maximum amount of guarantee contract name: "the maximum
guaranteed contract" (ID: ICBC 40000928-2012henggangbaozi 0054)
Guarantor: Springpower Technology (Shenzhen) Co., Ltd.
Maximum amount of guarantee contract name: "the maximum
guaranteed contract" (ID: ICBC 40000928-2012henggangbaozi 0055)
Guarantor: Dangyu Pan
Article 8 financial agreement not applicable
/
/
Article 9 dispute resolution
Dispute resolution under this contract is resolved through
litigation at the court with jurisdiction where the lender is located.
Article 10 other
10.1 Contract is in triplicate, the borrower has one copy,
the lender has two copies, which have the same legal effect.
10.2 The following attachments along with other attachments
mutually recognized form an integral part of this contract, and have the same legal effect as the contract:
Annex 1: Notice of Withdrawal
Annex 2: commission payment protocol
Article 11 other matters agreed by the parties
/
The second part Specific
Provisions
Article 1 rate and interest
1.1 In foreign currency borrowings, LIBOR is the benchmark
interest rate on the withdrawal date or two banking days before the adjustment date of base interest rate (11:00 noon London time)
Reuters (REUTRES) Financial Telecommunication terminal "LIBOR" page displays the borrower under this contract currency
interbank offered rate; HIBOR as the benchmark interest rate adjustment date or withdrawal two banking days before (11:15 noon
Hong Kong time) Reuters (REUTRES) Financial Telecommunication terminal "HIBOR" page shows the same industry in HK Offered
Rate.
1.2 For loans with floating interest rates under the contract,
, the rules to adjust the underlying interest rate will not be changed.
1.3 For loans with interest rates settled monthly, interest
settlement date is 20th of each month; For loans with interest rates settled quarterly, the interest settlement date is the 20th
of the last month of each quarter; For loans with interest rates settled semi-annually, interest settlement dates are June 20 and
December 20 of each year.
1.4 The first interest period is from the actual withdrawal
date to the date of the first interest settlement date; the last interest period is from the following day after the previous interest
period to the final repayment date; other interest period is from the following day after the previous interest period to the next
interest settlement date.
1.5 In the case the People's Bank of China adjust the policies
to mandate loan interest rate, the lender will follow such policies, and will not notify the borrower.
1.6 Upon signing the contract, if the loan interest rate
is discounted from the base interest rate determined by People’s Bank of China, the Lender has the right to reevaluate the
discount given to the Borrower based on the national policies, credit quality of the borrower, and the changes of the guarantors,
etc. The Lender has the discretion to decide on the cancellation of part or all discount, and will notify the borrower in the due
course.
Article 2 loan withdrawal and release
2.1 Upon withdrawal, the borrower must meet the following
prerequisites, otherwise lenders are not obliged to release any funds to the borrower, except the lender agrees to advance loans:
(1) Except loans on credit, the Borrower has provided appropriate
guarantee according to the Lender’s requirements, and related guarantee procedures are completed;
(2) No breaches occurred under this contract or other contracts
signed by the Borrower and the Lender.;
(3) Evidence of use of funds provided by the borrower conforms
to the agreed use of funds;
(4) Provide any other materials needed by the lender.
2.2 The written documents provided by the Borrower to the
Lender upon withdrawal shall be original; Under conditions that original written documents can not be provided, after the consent
of the Lender, a copy of the duplicate with the official seal stamped from the Borrower.
2.3 Borrowers must submit withdrawal notice to the Lender
at least five banking days in advance before any withdrawal. Once withdrawal notice is submitted, without the written consent of
the lender, it may not be revoked.
2.4 If the Borrower meets the prerequisites for withdrawal
or agreed by the Lender to advance the loan, the lender transfers loan amount to the designated borrowers’ account, the lender
is deemed to have issued the loan to the Borrower in accordance with the contract.
2.5 In accordance with relevant regulatory requirements and
management requirements of lenders, loans more than certain amount or that meet other conditions should be paid by entrusted payment
of the Lender, the Lender should pay loans to the designated object with the borrower's withdrawal application and payment commission.
Therefore, the Borrower should
sign entrusted payment agreement with the Lender as the attachment of the contract, and should open or designate a specific account
at the Lender’s bank to settle the payments.
Article 3 repayment
3.1 The Borrower shall timely repay the contract principal,
interest and other payables in full. On the payment date and one banking day before each settlement day, current payable interest,
principal and other payables should be fully deposited into the repayment account opened at the Lender’s bank , which shall
be collected by the Lender on the repayment date or interest settlement date, or the Lender has the right to require the Borrower
handle transfer procedure . If the repayment amount in the account is insufficient to cover all due amounts of the Borrower, the
lender has the right to decide the liquidation order.
3.2 The Borrower should submit written application 10 banking
days in advance for advanced repayment of all or part of the loans to the lender with the consent of the Lender to pay compensation
to the Lender in accordance with the standard agreed in the contract.
3.3 The Borrower shall repay due principal, interest and
other payables in advance with the consent of the Lender according to the contract on the advanced repayment date .
3.4 The lender has the right to call loans in advance
according to the returning situation of borrower’s funds.
3.5 If the actual loan period is shorten because of the
advanced repayment by the Borrower or advanced loan call by the Lender according to the contract, the corresponding interest rate
level will not be adjusted.
Article 4 cycle loan (not applicable)
Article 5 guarantee
5.1 In addition to loans on credit, the borrower should provide
legitimate and effective guarantee that is accepted by the Lender to fulfill the obligations under the contract . Guarantee contracts
are signed separately.
5.2 Borrower shall promptly notify the lender, and further
provides other guarantees accepted by the Lender under the conditions that damages, depreciation, property disputes, being seized
or detained, or discreet disposal of collateral by the Borrower, or the guarantor’s financial condition changes adversely,
5.3 If accounts receivables are pledged as collaterals under
the contract during the period the contract is still effective, the lender has the right to declare early maturity of loans, and
require the borrower to immediately repay some or all of loan principal and interest, or request additional legitimate and effective
collaterals against the loans, if one of the following conditions occur,
(1) The pledgor of the accounts receivable bad debt increases
on the payer of which the accounts receivable are pledged, for two consecutive months;
(2) The accounts receivable that is uncollectable accounts
for over 5% of the pledgor’s total accounts receivable.
(3) The accounts receivable is due and uncollectable when
trade disputes (including but not limited to quality, technology, service-related disputes) or debt disputes between the pledgor
and payer
Article 6 account management
6.1 Borrower shall designate a special account at the Lender’s
bank for cash inflows for collecting sales revenues or planned capital repayment. Corresponding to the sales in the form of non-cash
settlement, the borrower should ensure timely receipt of funds into the designated account.
6.2 Lender has the right to monitor the designated account,
including but not limited to the capital income and expenditure, the borrower should cooperate. If required by the Lender, the
Borrower should enter into a special account control agreement.
Article 7 representations and warranties
Borrower makes the following representations and warranties
to the lender, and such representations and warranties remains in effect under the term of the contract:
7.1 Borrower shall have the qualification, and ability to
perform the contract signed with the Lender.
7.2 The Borrower has received all the necessary authorization
or approval to sign and perform this contract, which is not in violation of the Articles of Association and relevant laws and regulations,
and shall bear other obligations under the contract not in conflict with other contracts.
7.3 The borrower has been scheduled to meet other debt payments,
bank loan principal and interest owed no malicious behavior.
7.4 The borrower has a sound organizational and financial
management system, in the last year of production and management process has not a major act of violation of discipline, the current
senior management has no significant adverse record.
7.5 The borrower provides to the lender of all documents
and information are true, accurate, complete and effective, there is no false record, misleading statement or significant omission.
7.6 The borrower provides to the lender's financial and accounting
reports are prepared under Chinese accounting standards, true, fair and complete reflection of the borrower's operations and liabilities,
and the borrower's financial situation has not any material adverse change since the most recent financial reporting period. 7.7
The borrower has not concealed to the lender any litigation, arbitration or claim involved.
Article 8 borrower commitment
8.1 The Borrower withdraws and uses funds under terms and
conditions in the contract. The borrowed money is not used for fixed assets and equity and other investments, not in any way into
the stock market, futures market or uses prohibited by relevant laws and regulations.
8.2 Repay the loan principal and interest and other payables
in accordance with the contract.
8.3 Accept and actively cooperate with the lender for account
analysis, inspection, on-site reviews, etc., including use of the loan, including the use of funds and supervision of the inspection.
In accordance with the lender’s requirements, the borrower periodically provides summary reports for the use of funds.
8.4 Accept the lender's credit check required by the lender,
and provide the lender with balance sheet, income statement and other financial and accounting information reflecting the borrower's
solvency, to actively assist and cooperate with the lender to investigate and review its financial situation and production operations.
8.5 Before paying off the loan principal and interest under
the contract and other payables, the Borrower is not allowed to repay and dividends.
8.6 For the merger, divesture, reduction, changes in ownership,
transfer of substantial assets and debt, significant foreign investment, substantial increase in debt financing and other activities
that may adversely affect the rights of the Lender’s interest, prior written consent is required by the lender.
8.7 One of the following circumstances occurs, notify the
lender:
(1) The change on articles of incorporation, business scope,
registered capital, the legal representative;
(2) Out of business, dissolution, liquidation, business for
rectification, revocation of business license is revoked or application (by application) bankruptcy;
(3) Or may be involved in major economic disputes, litigation,
arbitration, or the property was legally seized, detained or regulation;
(4) Shareholders, directors and senior management is currently
involved in serious cases or economic disputes.
8.8 Timely, completely and accurately disclose related party
relationships and related party transactions.
8.9 Sign and verify notices mailed, or in the form, from
lender ..
8.10 Not dispose of assets in order to reduce the solvency;
provide guarantees to third parties without damaging the interest of the lender.
8.11 If the loans under the contract are on credit basis,
the Borrower should provide complete, true, accurate information to reflect providing guarantees that may affect its obligations
under this contract, and acquire written consent from the lender.
8.12 Take responsibility for the expenses from the Lender
in purpose of fulfillment of contracts, including but not limited to litigation or arbitration fees, property preservation fees,
legal fees, execution fees, assessments fees, auction fees, notice fees.
8.13 Debt settlement under the contract is in priority to
its shareholders, and at least has equal status with the borrower's other similar debt from other creditors and borrowers.
8.14 Reinforce the social and environmental risk management,
and agree to accept inspections by the Lender. If requested by the Lender, the Borrower agrees to provide the corresponding report.
Article 9 lender commitment
9.1 Release loans to the Borrower in accordance with the
contract.
9.2 Maintains the confidentiality of non-public information,
except required by laws and regulations otherwise.
Article 10 breach of contract
10.1 Any of the following events constitutes an event of
breach:
(1)The borrower fails to repay
principal, interest, and other payables in accordance with the provisions specified in this contract, or fails to fulfill any other
obligations in this contract, or contrary to the statements, guarantee and commitments in this contract;
(2)The guarantees in this contract
have adversely changed to the Lender’s loan, and the Borrower is not available to provide other guarantees approved by the
lender;
(3) Fail to pay off any other debts
due by the Borrower, or fails to fulfill or breach other obligations in this contract, or likely to affect the performance of the
obligations in this contract;
(4) The financial performance of
the profitability, debt payment ability, operating capacity and cash flow of the Borrower exceed the agreed standards, or deterioration
has been or may affect the obligations in this contract;
(5) The Borrower's ownership structure,
operation, external investment has changed adversely, which have affected or may affect the fulfillment of the obligations in this
contract;
(6) Borrower involves or may involve
significant economic disputes, litigation, arbitration, or asset seizure, detention or enforcement, or judicial or administrative
authorities for investigation or take disciplinary measures in accordance with the laws, or illegal with relevant state regulations
or policies in accordance with the laws, or exposure by media, which have affected or may affect the fulfillment of the obligations
in this contract;
(7) The borrower’s principal
individual investors, key management officer’s change, disappearances or restriction of personal liberty, likely to affect
the performance of the obligations in this contract;
(8) The borrower using false contracts
with related parties, using no actual transaction to extract the lender’s funds or credit, or evasion of lender’s loan
right through related party transactions;
(9) Borrowers have been or may
be out of business, dissolution, liquidation, business reorganizations, business license has been revoked or bankruptcy;
(10) Borrowers breaches food safety,
production safety, environmental protection and other environmental and social risk management related laws and regulations, regulatory
requirements or industry standards, resulting in accidents, major environmental and social risk events, likely to affect the performance
of the obligations in this contract;
(11) In this contract, the borrowing is paid by credit, the
borrower's credit rating, level of profitability, asset-liability ratio, net cash flow of operating and other indicators do not
meet the credit conditions of the lender; or without the lender’s written contract, pledges guarantee or provides assurance
guarantees to other party, likely to affect the performance of the obligations in this contract;
(12) Other adverse situations may
affect in the realization of loan right in this contract.
10.2 If the borrower breaches of contract, the lender has
the right to take one or more of the following measures:
(1) Require the borrower to remedy
the default within a certain time limit
(2) Terminate other financing funds
in other contract issued to the borrower by the lender, cancel part or all of undrawn borrowings and other financing amount of
borrower;
(3) Announce the outstanding loan
and other financing amount between the lender and the borrower in this contract, and take back the outstanding amounts;
(4) Requires the borrower to compensate
the loss of the lender caused by the breach of contract;
(5) Measures according to provisions
of lows and regulations, provisions of this contract and other necessary measures.
10.3 If the borrower fails to repay the due loan (including
loan declared expire immediately), the lender has the right to charge penalty interest according to penalty interest rate agreed
by this contract from the due date. The interest fails to repay on time, charge compound interest according to overdue penalty
interest rate.
10.4 Borrower fails to use the loan for agreed usage, the
lender has the right charge penalty interest on embezzlement according to embezzlement penalty interest rate agreed by this contract.
The interest fails to repay on time during the embezzlement period, charge compound interest according to embezzlement penalty
interest rate.
10.5 The borrower simultaneously happens the situations in
section 10.3, 10.4, choosing the heavier interest rate to charge, cannot impose in double.
10.6 If the borrower does not repay the principal, interest
(including interest and compound interest) or other payables on time, the lender has the right to announcements through the media
for collection.
10.7 If the control or controlled relationship between related
parties of the borrower and the borrower changes, or the related parties of the borrower happens the other situations except the
situations of (1) and (2) in above provision 10.1, likely to affect the performance of the obligations of the borrower in this
contract, the lender has the right to take the measures agreed in the contract.
Article 11 deduction
11.1 Borrower does not repay the due debt in this contract
according to this contract(including the debt declared due immediately), the lender has the right to deduct corresponding amount
from all the functional and foreign accounts opened at the branches of ICBC, until all the debt of the borrower in this contract
are paid off.
11.2 If the currency of deduct payments is inconsistent with
the currency in this contract, the exchange rate on the deduction day is the applicable exchange rate. The interest and other fees
during the deduction fees and debt pay off day, and the difference because of fluctuations the exchange rate during this period
is assumed by the borrower.
11.3 If deducted amount for the lender is insufficient to
pay off all debts, the lender has the right to determine the payment order.
Article 12 transfer of rights and obligations
12.1 Lender has the right to transfer all or part of the
right in this contract to a third party, the transferring actions do not need to acquire the consent of the borrower. If without
the consent of the lender in writing, the borrower cannot transfer any right and obligations in this contract to a third party.
12.2 The Lender or China Industrial and Commercial Bank Limited
("ICBC") can Authorize or commit the other branches to perform the rights and obligations in this contract according
to operation need, or transfer the loan right in this contract to the other branches of ICBC, the borrower must agree, and the
above actions of the lender do not need to ask for permission of borrower. The other branches which undertake the lender’s
rights and obligations have the right to perform all rights in this contract, and have right to apply for litigation, arbitration,
compulsory execution for the disputes in this contract in the branch’s name.
Article 13 Effect, Change and Terminate
of This Contract
13.1 This contract is effective since the signature date,
and is terminated on the day the borrower performs all the obligations in this contract.
13.2 Any change of this contract shall be agreed by all parties
involved and be made in writing. The changes of provisions and agreements are part of the contract, has equal legal right with
the contract. Except the changed part, the rest part of this contract is still valid, before the changes is in effect, the original
terms of this contract is still valid.
13.3 The change or termination of this contract will not
affect the right of all parties involved to require compensation. The termination of this contract, will not affect the effectiveness
of the dispute settlement provisions.
Article 14 law and dispute resolution
The contract formation, validity, interpretation, performance
and dispute settlement are applicable PRC laws. All caused by the contract or in connection with the contract-related disputes
and disputes, both parties should be resolved through consultation, the consultation fails according to the contract settlement.
Article 15 complete contract
The first part of this contract, "borrowing conditions"
and the second part of the "liquidity loan contract terms," together form a complete loan contract, the same two words
have the same meaning. The loan borrower is constrained by the above two parts.
Article 16 notice
16.1 All notices under the contract should be given in writing.
Unless otherwise agreed, the parties designated residence stated in this contract for communication and contact address. Address
of any party or other contact is changed, shall be in writing promptly notify the other party.
16.2 One party can notify the other party in the form of
announcement or notary service if the recipient party refuses to receive other circumstances that cause inability to deliver.
Lenders (Seal): Industrial and
Commercial Bank of China Ltd., Shenzhen Henggang Branch
Responsible person / authorized agent:Duoping Yang
Borrower (seal): Shenzhen Highpower Technology Co., Ltd.
Legal representative / authorized agent:Dangyu Pan
Contract signed on:
Exhibit 31.1
Certification of Chief Executive Officer
pursuant to Item 601(b)(31) of Regulation S-K,
as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
I, Dang Yu Pan, certify that:
|
1. |
I have reviewed this annual report on Form 10-K of Highpower International, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
(d) Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 30, 2015 |
|
/s/ Dang Yu Pan |
|
By: Dang Yu Pan |
Chief Executive Officer |
(Principal Executive Officer) |
Exhibit 31.2
Certification of Chief Financial Officer
pursuant to Item 601(b)(31) of Regulation S-K,
as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
I, Henry Sun, certify that:
|
1. |
I have reviewed this annual report on Form 10-K of Highpower International, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
(d) Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 30, 2015 |
|
/s/ Henry Sun |
|
Henry Sun |
Chief Financial Officer |
(Principal Financial and Accounting Officer) |
Exhibit 32.1
Certification of Chief Executive Officer
and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
In connection with the annual report of
Highpower International, Inc. (the “Company”) on Form 10-K for the year ending December 31, 2014, as filed with
the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities
and on the date indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to his knowledge:
(1) The Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report
fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Dang Yu Pan |
|
Dang Yu Pan |
|
Chairman of the Board and Chief Executive Officer |
|
(Principal Executive Officer) |
|
March 30, 2015 |
|
|
|
/s/ Henry Sun |
|
Henry Sun |
|
Chief Financial Officer |
|
(Principal Financial and Accounting Officer) |
|
March 30, 2015 |
|
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