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, 2017
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.
(E xact Name of Registrant As Specified In Its Charter )
Delaware | 20-4062622 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
Building A1, 68 Xinxia Street, Pinghu, Longgang, Shenzhen, Guangdong People’s Republic of China |
518111 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code : (86) 755-89686292
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class | Name of each exchange on which registered | |
Common Stock, $0.0001 par value | Nasdaq Stock Market LLC (Nasdaq Global Market) | |
Preferred Stock Purchase Rights | Nasdaq Stock Market LLC (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. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “small reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ | Accelerated filer ¨ | |
Non-accelerated filer ¨ | Smaller reporting company x | |
Emerging growth company ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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, 2017 (based on $3.65 per share, the price at which the registrant’s common stock was last sold on June 30, 2017) was approximately $37.1 million.
There were 15,509,658 shares outstanding of the registrant’s common stock, par value $0.0001 per share, as of April 4, 2018. 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, 2017
i |
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:
· | A global economic downturn adversely affecting demand for our products; |
· | Our reliance on our major customers for a large portion of our net sales; |
· | Our reliance on our major suppliers for our principal raw material; |
· | Our ability to develop and market new products; |
· | Our ability to establish and maintain a strong brand; |
· | Protection of our intellectual property rights; |
· | The implementation of new projects; |
· | Our ability to successfully manufacture and deliver our products in the time frame and amounts expected; |
· | Exposure to product liability, safety, and defect claims; |
· | Exposure to currency exchange risks during our product export; |
· | Rising labor costs, volatile metal prices, and inflation; |
· | Changes in the laws of the PRC that affect our operations; |
· | Our ability to obtain and maintain all necessary government certifications and/or licenses to conduct our business; |
· | Development of an active trading market for our securities; |
· | The cost of complying with current and future governmental regulations and the impact of any changes in the regulations on our operations; and |
· | 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.” |
ii |
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.
iii |
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 subsidiary Shenzhen Highpower Technology Company Limited (“SZ Highpower”) and SZ Highpower’s wholly owned subsidiary Huizhou Highpower Technology Company Limited (“HZ HTC”) and SZ Highpower’s and HKHTC’s jointly owned subsidiaries Springpower Technology (Shenzhen) Company Limited (“SZ Springpower”) and Icon Energy System Company Limited (“ICON”). SZ Highpower no longer holds the controlling equity interest over its previously 70%-owned subsidiary Ganzhou Highpower Technology Company Limited (“GZ Highpower”) and deconsolidated GZ Highpower on December 21, 2017. Highpower and its subsidiaries are collectively referred to as the “Company”, unless the context indicates otherwise.
Corporate Information
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. 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.
To adapt to this demand, SZ Highpower was founded to manufacture, market and research Ni-MH batteries. SZ Highpower’s predecessor was founded in Guangzhou in 2001, and moved to Shenzhen in 2002.
Highpower was incorporated in the state of Delaware on January 3, 2006 and was 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. HZ Highpower was dissolved in 2015. 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%.
In 2011, HKHTC formed another wholly-owned subsidiary, ICON, a company organized under the laws of the PRC. On July 28, 2017, ICON further increased its registered capital to $15,000,000. SZ Highpower holds 93.33% of the equity interest of ICON, and HKHTC holds the remaining 6.67%.
In 2012, SZ Highpower formed a wholly-owned subsidiary HZ HTC. In March 2015, HZ HTC increased its paid-in capital to RMB60,000,000 ($9,496,526).
1 |
In 2010, SZ Highpower formed a subsidiary GZ Highpower. 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). 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. On December 11, 2017, GZ Highpower signed an Agreement on Capital Increase and Share Enlargement (the “Agreement”) with Xiamen Tungsten Co., Ltd. ("Xiamen Tungsten") and Mr. Ou, the General Manager of GZ Highpower. Pursuant to the terms of the Agreement, GZ Highpower received a total of RMB92.8 million (approximately $14.3 million), including RMB78.9 million (approximately $12.1 million) from Xiamen Tungsten in exchange for 55.294% ownership of GZ Highpower (the “Transaction”). The Transaction was completed on December 21, 2017. After the Transaction, SZ Highpower holds 31.294% of the equity interest of GZ Highpower. As a result, the Company no longer holds the controlling equity interest of GZ Highpower and deconsolidated GZ Highpower on December 21, 2017.
All other operating subsidiaries are incorporated in the People’s Republic of China (“PRC”) and are listed below:
Subsidiary | Principal Activities | |
SZ Highpower | Manufacturing, marketing and research of Ni-MH batteries | |
SZ Springpower | Manufacturing, marketing and research of lithium batteries | |
ICON | Design and production of advanced battery packs and systems | |
HZ HTC | Manufacturing, marketing and research of lithium batteries |
2 |
Below is organizational flow chart of the Company:
Our Strategy
Our goal is to become a global leader in the development and manufacture of rechargeable battery products. We believe the following strategies are the critical to achieve this goal:
Continue to pursue cost-effective opportunities
Our operating model, coupled with our modern manufacturing processes, has resulted in 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.
Continue to invest in Research and Development (“R&D”)
In order to maintain our difference, we will continue to strengthen the investment in R&D. We have also established a good cooperative relationship with universities, such as Central South University and Tsinghua University.
Continue to focus on brand customers
We are committed to bringing quality products and services to brand customers in the world and the top of segment markets to ensure the customer brand value continuously grows.
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 to expect a longer running time between charges as well as the performance of cycle life exceeds 2000 cycles for high end products. We produce AA, AAA, 9V, C, D, SC (Normal & RTU version) sized batteries in blister packing as well as chargers and battery packs.
Similar to Ni-MH batteries, we established lithium-ion batteries production lines to meet market needs. We produce Lithium-ion cylindrical, Lithium-ion polymer rechargeable batteries and power source solutions.
3 |
Sales and Marketing
We have a broad sales network of approximately 70 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 from our customers are based primarily on purchase orders we receive from time to time rather than firm, long-term purchase commitments. 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 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.
During the years ended December 31, 2017 and 2016, approximately 21.2% and 22.9% 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 years ended December 31, 2017 and 2016, no customer accounted for 10% or more of net sales.
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-ion 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; Ni-Cad; Ni-MH; liquid lithium-ion and lithium-ion polymer. Competition is typically based on design, quality, stability, and performance. The technology behind Ni-MH and lithium rechargeable batteries has consistently improved over time and we continue to enhance our products to meet the competitive threats from its competitors.
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.
For Ni-MH, 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 cobalt are available from a limited number of suppliers. No supplier accounted for over 10% of our total purchase amount during the years ended December 31, 2017 and 2016. 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.
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 in Shenzhen and in Huizhou, a dedicated design, sales and marketing team and 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.
4 |
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 institute is currently staffed with over 350 research and development technicians who overlook our basic research center, product development center, process engineering center, material analysis and performance testing labs. These teams work together to research new material and techniques, develop new products and push to mass production.
For the years ended December 31, 2017 and 2016, we expended $9,512,074 and $9,243,750, respectively, in research and development.
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 regularly file patent applications to protect our research, development and design, and are currently pursuing numerous patent applications in China. Over time, we have accumulated a lot of patents in China. We also have a U.S. patent for safety technology on rechargeable batteries.
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.
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.
Employees
As of December 31, 2017, we had approximately 3,600 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.
5 |
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, 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.
6 |
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, Li-ion and Li-polymer batteries. Our ability to adapt to evolving industry standards and anticipate future standards will be a significant factor in maintaining and improving our competitive position and our prospects for growth. To achieve this goal, we have invested and plan to continue investing significant financial resources in research and development. Research and development, however, is inherently uncertain, and we might encounter practical difficulties in commercializing our research results. 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. Accordingly, our significant investment in research and development may not bear fruit. On the other hand, our competitors may improve their technologies or even achieve technological breakthroughs that would render our products obsolete or less marketable. 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. 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. 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.
7 |
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 prices our 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 our 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.
8 |
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 |
· | 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 activities of our non-U.S. subsidiaries may be subject to U.S. taxation and the new U.S. tax reform legislations may adversely affect our results of operations.
Most of our subsidiaries are based in China and are subject to income taxes in the PRC. These China-based subsidiaries conduct substantially all of our operations, and generate most of our income in China. Highpower International, Inc. is a Delaware corporation and is subject to income taxes in the United States. New U.S. federal tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), was signed into law on December 22, 2017. The Tax Act significantly modified the U.S. Internal Revenue Code by, among other things, reducing the maximum U.S. federal corporate income tax rate from 35% to a flat rate of 21% for taxable years beginning after December 31, 2017; limiting and/or eliminating many business deductions; imposing a one-time transition tax on a mandatory deemed repatriation of previously deferred foreign earnings of certain foreign subsidiaries; generally eliminating U.S. corporate income tax on dividends from foreign subsidiaries subject to certain limitations; and providing for new taxes on certain foreign earnings. Taxpayers may elect to pay the one-time transition tax over eight years, or in a single lump-sum payment. See Note 14 to our audited consolidated financial statements beginning on page F-1 of this report.
Certain activities conducted in the PRC or other jurisdictions outside of the U.S. may give rise to U.S. corporate income tax. These taxes would be imposed on the Company when its subsidiaries that are controlled foreign corporations (“CFCs”) generate income that is subject to Subpart F of the U.S. Internal Revenue Code, or Subpart F. Passive income, such as rents, royalties, interest, dividends, and gain from disposal of our investments are among the types of income subject to taxation under Subpart F. Any income taxable under Subpart F is taxable in the U.S. at federal corporate income tax rates of up to 21% for taxable years beginning after December 31, 2017. Subpart F income that is taxable to Highpower International, Inc., even if it is not distributed to Hong Kong Highpower Technology Company Limited, may also include income from transactions where the Company’s non-U.S. subsidiaries make an “investment in U.S. property,” within the meaning of Subpart F, such as holding the stock in, or making a loan to, a U.S. corporation.
The Tax Act also includes provisions for a new tax on global intangible low-taxed income (“GILTI”) effective for tax years beginning after December 31, 2017. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of CFCs, subject to the possible use of foreign tax credits and a deduction equal to 50% to offset the income tax liability, subject to some limitations. The computation of GILTI is still subject to interpretation and additional clarifying guidance is expected.
We have made reasonable estimates of the effects of the tax law changes, including the remeasurement of our existing deferred tax balances and recording a tax liability for the mandatory repatriation of deferred foreign earnings. The final impact of the Tax Act may differ from these provisional estimates due to forthcoming guidance in interpretation of the law and accounting, or further refinement of our analysis. Any adjustment could adversely affect our earnings.
9 |
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. During 2017, Mainland China, which represented 57.0% of our net sales for the year ended December 31, 2017, experienced a pronounced deceleration in its economic growth. 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 $13.7 million and $8.5 million in the years ended December 31, 2017 and 2016, 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.
10 |
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. 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.
11 |
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 expansion of our employee base for managerial, operational, financial, and other purposes. 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.
12 |
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.
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, might be impaired. Without sufficient liquidity, we may be forced to curtail our operations. 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.
The Company leverages from various Chinese banks to fund its business operations and 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, 2017, the Company’s debt asset ratio was 69.1%. 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.
13 |
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:
· | Vulnerability of our business to a general economic downturn in China; |
· | Fluctuation and unpredictability of costs related to the raw materials used to manufacture our products; |
· | Seasonality of our business; |
· | Changes in the laws of the PRC that affect our operations; |
· | Competition from our competitors; and |
· | 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.
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 subject to shareholder lawsuits and SEC enforcement actions, conducted internal and external investigations into the allegations. 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.
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, 2017, we had outstanding options exercisable for an aggregate of 130,042 shares of common stock at a weighted average exercise price of $2.80 per share. We have registered the issuance of all the shares issuable upon exercise of the options, 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 of December 31, 2017, we also had outstanding warrants exercisable for an aggregate of 200,000 shares of common stock at a weighted average exercise price of $3.00 per share. As our stock price rises, the holders may exercise their 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.
14 |
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. Although the current government of the PRC has been pursuing economic reform policies that encourage private economic activities and greater economic decentralization, the PRC government continues to exercise significant control over economic growth in China through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and imposing policies that impact particular industries or companies in different ways. There is no assurance, 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, SZ Springpower and ICON 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:
· | Levying fines; |
· | Revoking our business license, other licenses or authorities; |
· | Requiring that we restructure our ownership or operations; and |
· | Requiring that we discontinue any portion or all of our business. |
15 |
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 of 1933, as amended, and the Securities Exchange Act of 1934, as amended (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.
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 subsidiary, SZ Highpower is a wholly foreign-owned enterprise, 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. 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.
16 |
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:
· | Regulatory penalties, fines and legal liabilities; |
· | Suspension of production; |
· | Alteration of our fabrication, assembly and test processes; and |
· | 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.
If our land use rights or the land use rights of our landlord are revoked or not renewed, 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 or not renewed 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 constructed a manufacturing facility. Besides the land use rights in Huizhou, 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 (“U.S. GAAP”). 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. GAAP. 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. GAAP and the historical financial statements must be audited in accordance with the standards of the 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. GAAP 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.
17 |
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. 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.
The foreign currency exchange rate between United States Dollar (“US$”) Dollars and Renminbi (“RMB”) could adversely affect our financial condition.
To the extent that we need to convert US$ into RMB for our operational needs, our financial position and the price of our common stock may be adversely affected should the RMB appreciate against the US$ at that time. Conversely, if we decide to convert RMB into US$ for the operational needs or paying dividends on our common stock, the US$ equivalent of our earnings from our subsidiaries in China would be reduced should the US$ appreciate against the RMB.
Because most of our oversea sales are made in US$ and most of our expenses are paid in RMB, devaluation of the US$ 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 US$ 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 US$ to RMB and modified the system by which the exchange rates are determined, which has resulted in an appreciation of the RMB against the US$. During the year ended December 31, 2017, the exchange rate of the RMB to the US$ decreased approximately 6.4% from the level at the end of December 31, 2016. 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 US$ against the RMB, including future devaluations. Because most of our net sales are made in US$ and most of our expenses are paid in RMB, any future devaluation of the US$ 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 approximately 1.6% in 2017. 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.
18 |
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.
We have received certain preferential tax concessions and the loss of these preferential tax concessions will cause our tax liabilities to increase and our profitability to decline.
In China, the companies granted with National High-tech Enterprise status (“NHTE”) enjoy a 15% income tax rate. This status needs to be renewed every three years. As of December 31, 2017, all of our subsidiaries located in China received NHTE status. The loss of the preferential tax treatment will increase our tax liabilities and reduce our profitability.
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 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.
19 |
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, SZ Springpower and ICON, 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.
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.
20 |
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. |
21 |
A few principal stockholders have significant influence over us.
Three of our stockholders beneficially own or control approximately 32.5% 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.
Compliance with changing regulation 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 has 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.
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.
Under our 2010 Equity Incentive Plan 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 2016 and 2017, and accordingly our results of operations for the years ended December 31, 2016 and 2017 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.
22 |
Our certificate of incorporation, bylaws, Stockholder Rights Agreement 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. |
On September 12, 2017, we entered into a Rights Agreement (the “Rights Agreement”) with Corporate Stock Transfer, Inc., as rights agent, and our Board of Directors declared a dividend distribution of one right for each outstanding share of the common stock to holders of record at the close of business on September 21, 2017. Each right is attached to and trades with the associated share of common stock. The rights will become exercisable only if a person acquires beneficial ownership of 15% or more of our common stock (or, in the case of a person who beneficially owned 15% or more of our common stock on the date the rights plan was adopted, such person acquires beneficial ownership of any additional shares of our common stock) or after the date of the Rights Agreement, commences a tender offer that, if consummated, would result in beneficial ownership by a person of 15% or more of our common stock. The rights will expire on September 12, 2020, unless the rights are earlier redeemed or exchanged.
The intent of the Rights Plan is to protect our stockholders’ interests by encouraging anyone seeking control of our company to negotiate with our Board of Directors. However, our Rights Agreement could make it more difficult for a third party to acquire us without the consent of our Board of Directors, even if doing so may be beneficial to our stockholders. This agreement may discourage, delay or prevent a tender offer or takeover attempt, including offers or attempts that could result in a premium over the market price of our common stock. This agreement could reduce the price that stockholders might be willing to pay for shares of our common stock in the future. Furthermore, the anti-takeover provisions of our Rights Agreement may entrench management and make it more difficult to replace management even if the stockholders consider it beneficial to do so.
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.
Any delay or prevention of a change of control transaction or changes in our Board of Directors or management could deter potential acquirers or prevent the completion of a transaction in which our stockholders could receive a substantial premium over the then current market price for their shares.
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.
23 |
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable to smaller reporting companies.
The Company currently has four active manufacturing operations located in mainland China in the cities of Shenzhen and Huizhou located in the Guangdong province. HKHTC’s registered office is located in Hong Kong. Our active facilities consist of manufacturing plants, dormitories and research and development facilities. We lease manufacturing facilities with varying terms ranging, which are renewed upon expiration. All leases have been fully prepaid until the expiration date, and we will renew all the leases before the expiration date.
In China, only the PRC government and peasant collectives may own land. In February 2007, the Company acquired approximately 126,605 square meters (1,362,765 square feet) of land equity in Huizhou, Guangdong province, China for a total of RMB21.5 million ($3.3 million) under a 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.
On January 14, 2016, FirsTrust China, Ltd (“FirsTrust”) filed an amended complaint in the Delaware Chancery Court (amending its initial complaint filed February 25, 2015) naming Highpower as the defendant asserting a cause of action for breach of contract and conversion of stock, and seeking damages in the form of issuance of 150,000 shares or the value of such shares, plus interest thereon, attorneys’ fees and costs and expenses. On February 4, 2016, Highpower filed an answer, affirmative defenses and counterclaim against FirsTrust asserting claims for equitable rescission, declaratory relief and breach of contract, and seeking rescission of the contract, return of the 200,000 warrants and 150,000 shares of Highpower stock previously issued to FirsTrust, plus interest, attorneys’ fees and costs and expenses. On January 24, 2017, the court denied FirsTrust’s motion for judgment on the pleadings. On January 19, 2018, the parties engaged in a court-sponsored mediation, which resulted in a settlement of all claims between the parties, the basic terms of which are evidenced by a “term sheet”. As part of the settlement, Highpower agreed to pay to FirsTrust the equivalent of $450,000 in Highpower’s common stock, with a portion payable in cash, at Highpower’s option. The settlement amount will be paid in two installments, with $212,500 payable in the form of 50,000 shares of common stock based on $4.25 per share to be paid as the first installment and a second installment of $237,500, or shares equal to that amount, to be paid within six months. The parties are currently working on a long form settlement agreement.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
24 |
ITEM 5. MARKET FOR REGISTRANT’S COMMON STOCK, R ELATED 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, 2017 | ||||||||
First Quarter | $ | 4.90 | $ | 2.10 | ||||
Second Quarter | $ | 5.70 | $ | 3.60 | ||||
Third Quarter | $ | 5.20 | $ | 3.25 | ||||
Fourth Quarter | $ | 5.75 | $ | 3.65 | ||||
Year ended December 31, 2016 | ||||||||
First Quarter | $ | 3.12 | $ | 1.65 | ||||
Second Quarter | $ | 3.07 | $ | 1.65 | ||||
Third Quarter | $ | 3.64 | $ | 1.78 | ||||
Fourth Quarter | $ | 3.14 | $ | 2.25 |
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; |
25 |
· | 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 April 4, 2018, we had 20 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, 2017 or 2016.
Transfer Agent
The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.
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
The following discussion and analysis of the Company’s historical results of operations and liquidity and capital resources should be read in conjunction with the consolidated financial statements of the Company and notes thereto appearing elsewhere herein. The following discussion and analysis 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 various factors. See “Forward Looking Statements” that precedes Item 1 above on page ii.
Overview
In 2017, Highpower’s overall revenue increased by $70.3 million or 40.4% compared to 2016. The main driver was our lithium business and new materials business. Lithium business net sales increased by $49.5 million, or 44.2% during 2017 compared to 2016. New materials business net sales increased by $24.5 million, or 543.2% during 2017 compared to 2016, which experienced an increase in larger volume orders with support from the new largest shareholder of GZ Highpower.
Ni-MH batteries and accessories net sales decreased by $3.7 million or 6.5%, during 2017 compared to 2016, which was in line with the whole industry trend.
26 |
The descriptions of the reportable segments have been changed from Lithium Batteries and Ni-MH Batteries to Lithium Business and Ni-MH Batteries and Accessories, respectively. Lithium Business mainly consists of lithium batteries, power storage system and power source solutions. Ni-MH Batteries and Accessories mainly consists of Ni-MH rechargeable batteries, sized batteries in blister packing as well as chargers and battery packs.
Gross profit during 2017 was $47.4 million, or 19.4% of net sales, compared to $38.1 million, or 21.9% of net sales in 2016. This decrease of gross profit margin was mainly due to the product mix and the high raw material price. The actions which we had taken to offset material price fluctuation expired gradually in the third quarter of 2017. Our gross profit margin was 14.9% in the fourth quarter of 2017 was due to the raw material price remains on high level and a substantial increase in new materials business which had a low gross profit margin. As we expected in the 10-Q of the third quarter of 2017, our gross profit margin was 17.0% after excluding new materials business in the fourth quarter of 2017.
For 2018, we will continue to drive business growth. As the raw material price may be still at a high level, we will strive to balance our selling price and customer expectation carefully. At same time, we will seek to continuously improve our labor efficiency and improve material usage for better gross margin.
Deconsolidation of GZ Highpower
On December 11, 2017, GZ Highpower signed the Agreement with Xiamen Tungsten and Mr. Ou, the General Manager of GZ Highpower. Pursuant to the terms of the Agreement, GZ Highpower received a total of RMB92.8 million (approximately $14.3 million), including RMB78.9 million (approximately $12.1 million) from Xiamen Tungsten in exchange for 55.294% ownership of GZ Highpower. The Transaction was completed on December 21, 2017. After the Transaction, the Company no longer holds the controlling equity interest of GZ Highpower and deconsolidated GZ Highpower. As of December 31, 2017, the Company held 31.294% of the equity interest of GZ Highpower which was recorded under the equity method.
In connection with the Transaction, RMB 40 million (approximately $6.1 million) of the proceeds was received by the Company in the form of repayments of loans and related interests that were previously extended by the Company to GZ Highpower.
During the year ended December 31, 2017, the Company recognized a gain amounting to $6,004,008 arising from deconsolidation of GZ Highpower.
Critical Accounting Policies, Estimates and Assumptions
The 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 accounting principles we utilized in preparing our consolidated financial statements conform in all material respects to U.S GAAP.
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, the allowance for doubtful receivables; recoverability of the carrying amount of inventory; fair value of financial instruments; provisional amounts based on reasonable estimates for certain income tax effects of the Tax Cuts and Jobs Act (the “Act”) 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. The Company analyzes the aging of the customer accounts, coverage of credit insurance, customer concentrations, customer credit-worthiness, historical and current economic trends and changes in its customer payment patterns when evaluating the adequacy of the allowance for doubtful accounts.
27 |
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 of product by customer. 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 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 net realizable value. Cost is determined using the weighted average method. Inventories include 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.
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 net realizable value.
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.
Foreign Currency Translation and Transactions. Highpower’s functional currency is the US$. HKHTC's functional currency is the Hong Kong dollar ("HK$"). The functional currency of the Highpower’s other direct and indirect wholly owned subsidiaries in the PRC is the RMB.
Most of the Company’s oversea sales are priced and settled with US$. 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 earnings 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$. Assets and liabilities of HKHTC and the PRC subsidiaries are translated at the current exchange rate at the balance sheet dates, revenues and expenses are translated at the average exchange rates during the reporting periods, and equity accounts are translated at historical rates. Translation adjustments are reported in other comprehensive income.
Recently Issued Accounting Standards
See Note 2 to the Consolidated Financial Statements included herewith.
28 |
Results of Operations
The following table sets forth the consolidated statements of operations of the Company for the years ended December 31, 2017 and 2016, both in US$ and as a percentage of net sales.
Consolidated Statements of Operations
(Dollars in Thousands, Except Diluted Earnings per Common Stock attributable to the Company) | For the years Ended December 31, | |||||||||||||||||||
2017 | 2016 |
Increased
(decreased) % |
||||||||||||||||||
Net Sales | 244,166 | 100.0 | % | 173,851 | 100 | % | 40.4 | % | ||||||||||||
Cost of Sales | (196,792 | ) | (80.6 | %) | (135,769 | ) | (78.1 | %) | 44.9 | % | ||||||||||
Gross profit | 47,374 | 19.4 | % | 38,082 | 21.9 | % | 24.4 | % | ||||||||||||
Research and development expenses | (9,512 | ) | (3.9 | %) | (9,244 | ) | (5.3 | %) | 2.9 | % | ||||||||||
Selling and distribution expenses | (7,501 | ) | (3.1 | %) | (6,888 | ) | (4.0 | %) | 8.9 | % | ||||||||||
General and administrative expenses | (15,394 | ) | (6.3 | %) | (18,186 | ) | (10.4 | %) | (15.4 | %) | ||||||||||
Foreign currency transaction (loss) gain | (2,390 | ) | (1.0 | %) | 1,959 | 1.1 | % | (222.0 | %) | |||||||||||
Income from operations | 12,577 | 5.2 | % | 5,723 | 3.3 | % | 119.7 | % | ||||||||||||
Changes in fair value of warrant liability | - | 0.0 | % | 140 | 0.1 | % | (100.0 | %) | ||||||||||||
Changes in fair value of foreign currency derivatives | 273 | 0.1 | % | - | - | N/A | ||||||||||||||
Government grants | 1,358 | 0.6 | % | 1,763 | 1.0 | % | (22.9 | %) | ||||||||||||
Other income | 459 | 0.2 | % | 509 | 0.3 | % | (10.0 | %) | ||||||||||||
Equity in earnings of investee | 107 | 0.0 | % | 352 | 0.2 | % | (69.5 | %) | ||||||||||||
Gain on dilution in equity method investee | 500 | 0.2 | % | - | - | N/A | ||||||||||||||
Gain on sales of long-term investment | 1,677 | 0.7 | % | - | - | N/A | ||||||||||||||
Gain on deconsolidation of a subsidiary | 6,004 | 2.5 | % | - | - | N/A | ||||||||||||||
Interest expenses | (1,426 | ) | (0.6 | %) | (1,420 | ) | (0.8 | %) | 0.5 | % | ||||||||||
Income before taxes | 21,529 | 8.8 | % | 7,067 | 4.1 | % | 204.6 | % | ||||||||||||
Income tax expenses | (4,315 | ) | (1.8 | %) | (1,439 | ) | (0.9 | %) | 199.8 | % | ||||||||||
Net income | 17,214 | 7.1 | % | 5,628 | 3.2 | % | 205.9 | % | ||||||||||||
Less: net income (loss) attributable to non-controlling interest | 441 | 0.2 | % | (490 | ) | (0.3 | %) | 190.0 | % | |||||||||||
Net income attributable to the Company | 16,773 | 6.9 | % | 6,118 | 3.5 | % | 174.2 | % | ||||||||||||
Diluted earnings per common stock attributable to the Company | 1.09 | 0.40 |
29 |
Net sales
Net sales for the year ended December 31, 2017 were $244.2 million compared to $173.9 million for the comparable period in 2016, an increase of $70.3 million, or 40.4%. The increase was driven by our lithium business and new materials business, which was partially offset decrease in net sales by Ni-MH batteries and accessories. Lithium business net sales increased by $49.5 million, or 44.2%, during the year ended December 31, 2017, compared to 2016, which was due to the increase in the number of lithium batteries units sold. New materials business net sales increased by $24.5 million, or 543.2%, during the year ended December 31, 2017, compared to 2016, which was primarily driven by increasing demand and increasing sales price of precious metal materials. Ni-MH batteries and accessories net sales decreased by $3.7 million, or 6.5%, during the year ended December 31, 2017, compared to 2016, which was in line with the whole industry trend.
Gross profit
Gross profit for the year ended December 31, 2017 was $47.4 million, or 19.4% of net sales, compared to $38.1 million, or 21.9% of net sales, respectively, for the comparable period in 2016. This decrease of gross profit margin was mainly due to the product mix and the high raw material price.
Research and development expenses
Research and development expenses were $9.5 million, or 3.9% of net sales, for the year ended December 31, 2017, as compared to $9.2 million, or 5.3% of net sales, for the comparable period in 2016. The Company will continue to invest on R&D activities in the future.
Selling and distribution expenses
Selling and distribution expenses were $7.5 million, or 3.1% of net sales, for the year ended December 31, 2017 compared to $6.9 million, or 4.0% of net sales, for the comparable period in 2016. The decrease of percent of net sales was attributable to our optimization of our customer base.
General and administrative expenses
General and administrative expenses were $15.4 million, or 6.3% of net sales, for the year ended December 31, 2017, compared to $18.2 million, or 10.4% of net sales, for the comparable period in 2016. This decrease was primarily due to the one-time expenses in 2016, including impairment loss of machinery and equipment and allowance for doubtful accounts that amounted to $0.5 million and $1.6 million, respectively. The Company expects that general and administrative expenses will remain stable even though the business continues to grow.
Foreign currency transaction (loss) gain
We experienced a loss of $2.4 million and a gain of $2.0 million on the foreign currency transaction between the US$ and the RMB for the years ended December 31, 2017 and 2016, respectively. The (loss) gain on the foreign currency transaction was due to the influence of the RMB relative to the US$ over the respective periods.
Changes in fair value in foreign currency derivatives
Changes in fair value in foreign currency derivatives were $0.3 million for the year ended December 31, 2017.
Government grants
Government grants were $1.4 million and $1.8 million for the years ended December 31, 2017 and 2016, respectively.
30 |
Other income
Other income, which consists of interest income and sundry income, was $0.5 million for the year ended December 31, 2017 and 2016.
Equity in earnings of investee
Equity in earnings of investee, the former equity method investee (Yipeng), was $0.1 million for the year ended December 31, 2017, as compared to $0.4 million for the comparable period in 2016.
Gain on dilution in equity method investee
Gain on dilution in equity method investee, which was due to the equity issuance of Yipeng to a third party, was $0.5 million for the year ended December 31, 2017.
Gain on sales of long-term investment
Gain on sales of long-term investment, which was due to sale the equity of Yipeng to a third party, was $1.7 million for the year ended December 31, 2017.
Gain on deconsolidation of a subsidiary
Gain on deconsolidation of a subsidiary, GZ Highpower, was $6.0 million for the year ended December 31, 2017.
Interest expenses
Interest expenses were $1.4 million for the years ended December 31, 2017 and 2016.
Income tax expenses
During the year ended December 31, 2017, we recorded a provision for income tax expense of $4.3 million as compared to $1.4 million for the comparable period in 2016.
Net income
Net income attributable to the Company (excluding net loss attributable to non-controlling interest) for the year ended December 31, 2017 was $16.8 million compared to net income attributable to the Company (excluding net loss attributable to non-controlling interest) of $6.1 million for the comparable period in 2016.
Reconciliation of Net Income to EBITDA
A table reconciling earnings before interest, income tax, depreciation and amortization (“EBITDA”), a non-GAAP financial measure, to the appropriate GAAP measure is included with the Company's financial information below. EBITDA was derived by taking earnings before interest expense (net), taxes, depreciation and amortization. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. The Company believes this non-GAAP measure is useful to investors as it provides a basis for evaluating the Company's operating results in the ordinary course of its operations. This non-GAAP measure is not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with its results of operations as determined in accordance with U.S. GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with, and not in lieu of, the corresponding GAAP measures.
31 |
For the years ended December 31, | ||||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Net income attributable to the Company |
1 6,772,852 |
6,117,927 | ||||||
Interest expense | 1,426,547 | 1,419,962 | ||||||
Income taxes expenses |
4,315,325 |
1,439,177 | ||||||
Depreciation and Amortization | 5,290,980 | 4,937,688 | ||||||
EBITDA | 27,805,704 | 13,914,754 |
Key financial items excluding GZ Highpower
The Company deconsolidated GZ Highpower on December 21, 2017. Considered that the Company will no longer present GZ Highpower’s total assets and liabilities and operations and comprehensive incomes upon deconsolidation, the table below shows the comparative figures of key financial items excluding the effect of GZ Highpower:
For the years ended December 31, | ||||||||
2017 | 2016 | |||||||
(unaudited) | (unaudited) | |||||||
$ | $ | |||||||
Sales: | ||||||||
Lithium Business | 161,660,771 | 112,128,757 | ||||||
Ni-MH Batteries and Accessories | 53,492,309 | 57,211,657 | ||||||
Sales to GZ Highpower | 746,776 | 367,982 | ||||||
Net sales (excluding GZ Highpwer) | 215,899,856 | 169,708,396 | ||||||
Gross profit (excluding GZ Highpwer) | 44,023,549 | 38,455,939 | ||||||
Gross profit margin (excluding GZ Highpwer) | 20.4 | % | 22.7 | % | ||||
Net income: | ||||||||
Net income | 17,213,896 | 5,627,777 | ||||||
Less: Net income (loss) of GZ Highpower (including transaction with GZ Highpwer) | 1,470,145 | (1,633,834 | ) | |||||
Net income (excluding GZ Highpwer) | 15,743,751 | 7,261,611 |
December 31, 2017 | December 31, 2016 | |||||||
(unaudited) | (unaudited) | |||||||
$ | $ | |||||||
Total Assets: | ||||||||
Lithium Business | 171,881,450 | 115,116,508 | ||||||
Ni-MH Batteries and Accessories (including $8,102,520 investment in GZ Highpower under equity method) | 48,383,088 | 37,994,369 | ||||||
Amount due from GZ Highpower | - | 6,601,065 | ||||||
Investment to GZ Highpower | - | 4,028,893 | ||||||
Total Assets (excluding GZ Highpwer) | 220,264,538 | 163,740,835 |
Liquidity and Capital Resources
We had cash of approximately $14.5 million as of December 31, 2017, as compared to $9.3 million as of December 31, 2016.
32 |
To provide liquidity and flexibility in funding our operations, we borrow funds under bank facilities and other external sources of financing. As of December 31, 2017, we had lines of credit with eight financial institutions aggregating $79.8 million. The maturities of these facilities vary from March 2018 to July 2019. The facilities are subject to regular review and approval. Certain of these bank facilities are guaranteed by our Chief Executive Officer, Mr. Dang Yu Pan and his wife, pledged by land use right and buildings, and contain customary affirmative and negative covenants for secured credit facilities of this type. Interest rates are generally based on the banks’ reference lending rates. No significant commitment fees are required to be paid for the bank facilities. As of December 31, 2017, we had utilized approximately $48.5 million under such general credit facilities and had available unused credit facilities of $31.3 million. The Company’s debt asset ratio dropped to 69.5% as of December 31, 2017, which decreased by 2.8% as compared to a debt asset ratio of 72.3% as of December 31, 2016.
For the year ended December 31, 2017, net cash used in operating activities was approximately $4.1 million, as compared to net cash provided by operating activities of $4.8 million for the comparable period in 2016. The net cash increase of $8.9 million used in operating activities is primarily due to an increase of $20.3 million in cash outflow from inventories, an increase of $14.6 million in cash inflow from amount due from related parties, and an increase of $3.2 million in cash outflow from amount due to a related party.
Net cash used in investing activities was $4.3 million for the year ended December 31, 2017 compared to $11.5 million for the comparable period in 2016. The net cash decrease of $7.2 million used in investing activities is primarily attributable to an increase of $10.5 million in cash inflow from proceeds from sale of long-term investments.
Net cash provided by financing activities was $11.6 million for the year ended December 31, 2017 as compared to $10.1 million for the comparable period in 2016. The net increase of $1.5 million cash provided by financing activities was primarily attributable to an increase of $5.9 million in cash inflow proceeds from non-financial institution borrowings.
For fiscal year 2017 and 2016, our inventory turnover was 6.0 and 6.6 times, respectively. The average days outstanding of our accounts receivable at December 31, 2017 was 77 days, as compared to 85 days at December 31, 2016. Inventory turnover and average days outstanding of accounts receivables are key operating measures that management relies on to monitor our business.
The accounts receivable and inventory turnover ratios have critical influence on the working capital. 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, work in process and finished goods inventory on hand to ensure timely delivery of our products to 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. Upon receiving payment for our accounts receivable, we pay our short-term loans. Our working capital management practices are designed to ensure that we maintain sufficient working capital.
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 accounts receivable. The credit risk on cash at bank and fixed deposits is limited because the counterparts are recognized financial institutions. Accounts receivable are subject to credit evaluations. We periodically record a provision for doubtful collections based on an evaluation of the collectability of accounts receivable 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. We also work with Chinese Export & Credit Insurance Corporation to control credit risk from accounts receivable.
Foreign Currency and Exchange Risk
Though the reporting currency is the US$, the Company maintains its financial records in the functional currency of RMB. Substantially all of our operations are conducted in the PRC and we pay the majority of our expenses in RMB. Approximately 40% of our sales are made in US$. During the year ended December 31, 2017, the exchange rate of the RMB to the US$ appreciated approximately 6.4% from the level at the end of December 31, 2016. Appreciation of the RMB against the US$ would increase our costs when translated into US$ and could adversely affect our margins unless we make sufficient offsetting sales. Exchange rate fluctuations may also affect the value, in US$ 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$ to our functional currency, the Company placed a purchasing forward exchange contracts to attempt to protect it from significant changes to the US$ which affects the value of its US$ receivables and sales.
33 |
Country Risk
The substantial portion of our business, assets and operations are located and conducted in China Mainland. While the economy has 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 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 controls and other 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 Exchange Act is properly recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and 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 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) and 15d-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) and 15d-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; |
34 |
· | 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, 2017. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Tread way Commission (COSO) in the 2013 Internal Control-Integrated Framework. Based on this assessment, management believes that as of December 31, 2017, our internal control over financial reporting is effective based on those criteria.
(c) Changes in Internal Control over Financial Reporting
There were no significant changes (including corrective actions with regard to significant deficiencies) in our internal controls over financial reporting that occurred during the fourth quarter of 2017, or is reasonably likely to materially affect, our internal control over financial reporting.
Comprehensive Credit Granting Contract between SZ Highpower and China Minsheng Banking Corp., Ltd. Shenzhen Branch
On November 14, 2017, SZ Highpower entered into a comprehensive credit line contract with China Minsheng Banking Corp., Ltd., Shenzhen Branch, which provides for a revolving line of credit of up to RMB20,000,000 ($3,073,188). The amount may be used for bank acceptance, although the maximum amount that the company may have outstanding under the facility at any given time is RMB20 million. SZ Highpower and its subsidiary HZ HTC or SZ Springpower may withdraw from each loan, from time to time as needed, but must make a specific drawdown application on or before November 14, 2018, after which time the bank may cancel all or part of the facilities. The loan is guaranteed by HZ HTC, SZ Springpower and our Chief Executive Officer, Dang Yu Pan. The line of credit required 40% of deposit, which is not included in the contract amount of line of credit, and actual total line of credit amount up to RMB 33,333,333 ($5,121,980). The used facility was $3,841,485 as of December 31, 2017 which was used for bank acceptance.
The following constitute events of default by SZ Highpower under the loan agreement: the occurrence of significant business difficulties or adverse changes on the financial conditions of SZ Highpower; an adverse change in the SZ Highpower’s business market; any major adjustment of relevant national policies; SZ Highpower violates any other contract or agreement concluded with others, or any commitment or warranty unilaterally made by SZ Highpower, which constitutes breach of other debts or other debts have been or may be announced acceleration by other creditor; the guarantor’s guarantee capacity becomes obviously insufficient, or the guarantor violates the guarantee contract or any obligation specified in the commitments made by the guarantor; any pledged or mortgaged property is damaged or value is obviously decreased, and SZ Highpower fails to provide a new guarantee as required by the bank; SZ Highpower indicates directly or by its conduct that it will not perform its obligations under the contract or other specified contracts with the bank; SZ Highpower’s providing false information or withholding of important financial facts (including balance sheet, profit and loss statement and other important materials), or refusal to accept the bank’s supervision of the use of the loan and the company’s operational and financial activities; SZ Highpower transfers its assets, withdraws funds, evades debts or has any other behavior which damages the bank’s rights and interest; SZ Highpower’s suffering major change in financial conditions, or involving in litigation, arbitration, administrative punishment or other judicial administrative proceedings, which may have adverse impact the execution of the contract; or any adversely affect SZ Highpower’s ability to perform its obligations under the loan facility.
Upon the occurrence of an event of default under the CCL Agreement, the bank may adjust or cancel a credit line, and demand SZ Highpower to prepay all the borrowings having been withdrawn under the contract.
35 |
Maximum Financing Contract between SZ Springpower and Hua Xia Bank Co., Ltd. Shenzhen Branch
On October 23, 2017, SZ Springpower entered into a comprehensive credit line contract with Hua Xia Bank Co., Ltd. Shenzhen Branch, which provides for a revolving line of credit of up to RMB50,000,000 ($7,682,970). SZ Springpower may withdraw from each loan, from time to time as needed, but must make a specific drawdown application on or before October 23, 2018, after which time the bank may cancel all or part of the facilities. The loan is guaranteed by HZ HTC, SZ Springpower, ICON, our Chief Executive Officer, Dang Yu Pan and his wife. The used facility was $2,937,968 as of December 31, 2017 which was used for bank acceptance.
The following constitute events of default by SZ Springpower under the loan agreement: SZ Springpower provides false information or holds back important operational accounting facts; SZ Springpower changes the purpose of the financed capital or uses the financed capital for conducting any illegal or rule-breaking transaction without The bank’s consent; SZ Springpower violates any other contract or agreement concluded with others, or SZ Springpower makes any commitment or warranty unilaterally, which constitutes serious breach of other debts; the guarantee capacity of the guarantor hereunder becomes obviously insufficient, or the pledged or mortgaged property hereunder is expropriated or damaged or its value obviously declines, and SZ Springpower is unable to provide a new guarantee according to The bank’s requirements; during the valid period of this Contract, SZ Springpower expressly indicates or indicates by its acts that SZ Springpower is unable to or fails to perform its obligations specified in this Contract or the specific business contract; SZ Springpower transfers its assets, withdraws funds, evades debts or has any other behavior which damages The bank’s rights and interest; SZ Springpower does not perform its commitments made in this contract or does not perform the obligations agreed in this Contract or a specific business contract; SZ Springpower refuses The bank’s supervision and examination on SZ Springpower’s use of the credit funds and relevant operation and financial activities; SZ Springpower uses a false contract with an affiliated party to discount or pledge on the basis of bill receivable and accounts receivable without real trade background to illegally withdraw The bank's financing; SZ Springpower evades The bank’s obligatory right intentionally through affiliated transaction; SZ Springpower’s operating mode, self system or legal status is changed, including but not limited to contracting, lease, custody, asset reorganization, debt reconstruction, reform of shareholding system, joint operation, consolidation (merger), division, paid transfer of property, joint venture (cooperation), reduce of registered capital, or applying for winding-up, applying for dissolution (or cancellation), applying for reforming, reconciliation and bankruptcy; SZ Springpower has not obtained SZ Springpower’s written consent, hasn’t implemented the liability of repayment of the debts under a specific business contract of this Contract or hasn’t provided a new guarantee accepted by The bank; There is any serious crisis of the overall credit status, operating conditions and financial status of the group customer of SZ Springpower, which causes significant threat to the safety of The bank’s loan; SZ Springpower is unable to or is likely unable to repay the due debt because SZ Springpower sells, transfers or disposes by other means any material assets or SZ Springpower’s operation and financial status becomes worse; or SZ Springpower is involved in any significant economic lawsuit or arbitration and other legal dispute, or is involved in any significant administrative punishment, which serious affects and threatens the realization of the creditor’s rights of The bank; SZ Springpower goes out of business, is dissolved, stops business or is ordered to close, or its business license is revoked or cancelled; SZ Springpower violates any other obligation agreed in this Contract, or the Guarantor hereunder violates any obligation agreed in the guarantee contract, that The bank thinks sufficient to affect realization of its creditor’s rights; SZ Springpower causes a liability accident or a significant environment and social risk incident due to violation of relevant laws, regulations, regulatory provisions or industrial standards for food safety, work safety, environmental protection and management of environment and social risks, which has affected or may affect the performance of obligations under this Contract or a specific business contract.
Upon the occurrence of an event of default under the Maximum Financing Contract, the bank may adjust or cancel a credit line, and demand SZ Highpower to prepay all the borrowings and interests having been withdrawn under the contract.
Comprehensive Credit Contract between HZ HTC and Guangdong Huaxing Bank Co., Ltd. Huizhou Branch
On October 26, 2017, HZ HTC entered into a comprehensive credit line contract with Guangdong Huaxing Bank Co., Ltd. Huizhou Branch, which provides for a revolving line of credit of up to RMB60,000,000 ($9,219,564). HZ HTC may withdraw from each loan, from time to time as needed, but must make a specific drawdown application on or before September 27, 2018, after which time the bank may cancel all or part of the facilities. The comprehensive credit line shall be automatically terminated if the bank does not issue any credit line to HZ HTC prior to March 27, 2018. The loan is guaranteed by SZ Highpower, our Chief Executive Officer, Dang Yu Pan and HZ HTC’s accounts receivable. The used facility was $5,676,178 as of December 31, 2017 which was used for bank acceptance.
36 |
The following constitute events of default by HZ HTC under the loan agreement: HZ HTC violates agreed obligations under this Contract or any specific business contract during the validity of this Contract, or HZ HTC expressly indicates or indicates through its acts that it does not perform the agreed obligations under this Contract or any specific business contract during the validity of this Contract; the relevant certificates and documents submitted by HZ HTC to The bank or the representations, warranties and commitments made by HZ HTC are not true, not accurate or not complete, or have false record, misleading statement or major omission; HZ HTC conceals some important true information, or fails to coordinate The bank’s investigation, examination and inspection; HZ HTC changes the purpose of the loan funds without authorization, or conducts illegal transactions by use of the loan or bank loans; HZ HTC violates any other similar contract (including but not limited to credit contract, loan contract and guarantee contract) concluded and signed with The bank or with any third party, or debt securities issued by HZ HTC, or any dispute arising from such contract or securities is under litigation or arbitration; HZ HTC’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 canceled; HZ HTC has any one of the following behaviors, being negligent in managing and claiming the creditor’s right due, or disposing and transferring its main properties free of charge, or at unreasonable low price or by other improper means, or escaping debts; HZ HTC illegally get funds or credit from The bank or other banks by using a false contract and arrangement with a third party (including but not limited to HZ HTC's affiliated parties), including but not limited to pledge or discount of the notes receivable and other claims without actual trading background; HZ HTC evades bank claims through affiliated transactions or by other means; HZ HTC's operation conditions go into major problems, such as deterioration of financial conditions, serious financial losses, loss of assets (including but not limited to loss of assets caused due to external guarantee) or other financial crisis; HZ HTC has any illegal management behavior, and is subject to administrative punishment or criminal sanction, or is being investigated by relevant authorities, or is likely to be subject to administrative punishment or criminal sanction; HZ HTC has the following changes, such as division, consolidation, major merger, acquisition and reconstruction, disposal of major assets, reduction of capital, liquidation, reorganization, being announced bankruptcy or being dissolved; HZ HTC's controlling shareholder or actual controller is changed that The bank thinks having affected or likely to affect realization of creditor's rights hereunder; or there is any significant event of HZ HTC's controlling shareholder, actual controller, legal representative or senior management personnel, including but not limited to due to illegal management behavior, subject to administrative punishment or criminal sanction, or being investigated by relevant authorities, or likely to be subject to administrative punishment or criminal sanction, or is involved in a lawsuit or arbitration case, or serious deterioration of financial conditions, being announced bankruptcy or dissolved; There is adverse change to the industry where HZ HTC is located, which The bank thinks having affected or likely to affect realization of creditor's rights hereunder; HZ HTC fails to handle settlement or deposit or relevant business with The bank according to provisions; other circumstances related to HZ HTC which endanger or likely to endanger realization of creditor’s right.
Upon the occurrence of an event of default under the Comprehensive Credit Contract, the bank may: to adjust, cancel or terminate the comprehensive credit line hereunder, or to adjust the valid period of the line; to announce immediate maturity of all or part of HZ HTC's debts; to demand HZ HTC to immediately repay all or part of the credit line used; to demand HZ HTC to add security or take other measures to ensure The bank’s lawful rights and interests not infringed; to make deduction directly from the account of HZ HTC and the guarantor to repay all the debts under this Contract and the specific business contract (including the debts The bank requests for prepayment), without obtaining HZ HTC’s consent in advance; to exercise the suretyship, ask the surety to perform suretyship liability, or realize claim through disposal of the mortgaged property and/or pledged property.
Working Capital Loan Contract between SZ Highpower and Bank of China, Buji Sub-branch
On October 20, 2017, SZ Highpower entered into a working capital loan contract with Bank of China, Buji Sub-branch providing for an aggregate loan of RMB10,000,000 ($1,536,594) to be used by SZ Highpower to purchase raw materials. The term of the loan is 12 months from the first withdrawal date. SZ Highpower must withdraw the facility before October 25, 2017 one-time, after which time the bank may cancel all or part of the facility. The interest rate will equal the one year benchmarked by interbank rates, plus 1.355% on all outstanding loan amounts. The loan is guaranteed by SZ Springpower and our Chief Executive Officer, Dang Yu Pan. The Company’s real estate properties and land use rights in Huizhou also serve as collateral for the loan. The balance of loan was $1,536,594 as of December 31, 2017.
37 |
The following constitute events of default under the loan contracts: failure to comply with repayment obligations under the agreement or any affiliated credit lines contract; failure to use borrowed funds according to the specified purposes; any statement made by SZ Highpower in the agreement is untrue or in violation of any commitments in the loan agreement or affiliated loan contracts; failure to provide an additional guarantor as required by the loan agreement; significant business difficulties or risks, deteriorated financial losses or losses of assets, or other financial crisis; breach of covenants in other credit agreements with the bank or affiliated institutions of the bank; any guarantor breaches a contract or defaults under any agreement with the bank or affiliated institutions of the bank; termination of its business or engagement due to any wind-up, cancellation or bankruptcy issues; involvement or potential involvement in significant economic disputes, litigation, arbitration or assets seizure or confiscation, or its involvement in other judicial proceedings or administrative punishment proceedings that have affected or may affect its capacity to perform its obligations under the affiliated specific credit line contract; an abnormal 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 obligation under affiliated specific credit line contract; Bank of China’s discovery of any situation that may affect the financial position or performance capacities of SZ Highpower or a guarantor after the bank’s annual review of SZ Highpower’s financial position and performance; failure to provide the relevant documentation acceptable to Bank of China about the inflows and outflows of large-sum and abnormal capital in capital recovery account; or being in violation of other rights and obligations under the affiliated specific credit line contract.
Upon the occurrence of an event of default, the bank may: request SZ Highpower or any guarantor to rectify the event of default within a specified time period; reduce, temporarily suspend or permanently terminate SZ Highpower’s credit limit in whole or in part; temporarily suspend or permanently terminate in part or in whole SZ Highpower’s application for specific credit line under the agreement; announce the immediate expiration of all the credit lines granted under the affiliated specific credit line contract as well as other contracts; terminate or release the contract, terminate or release in part or in whole any of the affiliated specific credit line contract as well as the other contracts executed between SZ Highpower and the bank; require compensation from SZ Highpower on the losses thereafter caused; hold SZ Highpower’s deposit account at the bank in custody for repayment of amounts due under the contract; exercise the real rights for security; request repayment from a guarantor; or take any other procedures deemed necessary by the bank.
Working Capital Loan Contract between SZ Springpower and Bank of China, Buji Sub-branch
On October 20, 2017, SZ Springpower entered into a working capital loan contract with Bank of China, Buji Sub-branch providing for an aggregate loan of RMB10,000,000 ($1,536,594) to be used by SZ Springpower to purchase raw materials. The term of the loan is 12 months from the first withdrawal date. SZ Springpower must withdraw in 30 days from October 24, 2017, after which time the bank may cancel all or part of the facility. The interest rate will equal the one year benchmarked by interbank rates, plus 1.355% on all outstanding loan amounts. The loan is guaranteed by SZ Highpower, HZ HTC and our Chief Executive Officer, Dang Yu Pan. The balance of loan was $1,536,594 as of December 31, 2017.
The following constitute events of default under the loan contracts: failure to comply with repayment obligations under the agreement or any affiliated credit lines contract; failure to use borrowed funds according to the specified purposes; any statement made by SZ Springpower in the agreement is untrue or in violation of any commitments in the loan agreement or affiliated loan contracts; failure to provide an additional guarantor as required by the loan agreement; significant business difficulties or risks, deteriorated financial losses or losses of assets, or other financial crisis; breach of covenants in other credit agreements with the bank or affiliated institutions of the bank; any guarantor breaches a contract or defaults under any agreement with the bank or affiliated institutions of the bank; termination of its business or engagement due to any wind-up, cancellation or bankruptcy issues; involvement or potential involvement in significant economic disputes, litigation, arbitration or assets seizure or confiscation, or its involvement in other judicial proceedings or administrative punishment proceedings that have affected or may affect its capacity to perform its obligations under the affiliated specific credit line contract; an abnormal change in any major individual investor or key management member of SZ Springpower or such a person or entity’s becoming subject to investigation or restriction by the judiciary, which have or may affect SZ Springpower’s performance of obligation under affiliated specific credit line contract; Bank of China’s discovery of any situation that may affect the financial position or performance capacities of SZ Springpower or a guarantor after the bank’s annual review of SZ Springpower’s financial position and performance; failure to provide the relevant documentation acceptable to Bank of China about the inflows and outflows of large-sum and abnormal capital in capital recovery account; or being in violation of other rights and obligations under the affiliated specific credit line contract.
Upon the occurrence of an event of default, the bank may: request SZ Springpower or any guarantor to rectify the event of default within a specified time period; reduce, temporarily suspend or permanently terminate SZ Springpower’s credit limit in whole or in part; temporarily suspend or permanently terminate in part or in whole SZ Springpower’s application for specific credit line under the agreement; announce the immediate expiration of all the credit lines granted under the affiliated specific credit line contract as well as other contracts; terminate or release the contract, terminate or release in part or in whole any of the affiliated specific credit line contract as well as the other contracts executed between SZ Springpower and the bank; require compensation from SZ Springpower on the losses thereafter caused; hold SZ Springpower’s deposit account at the bank in custody for repayment of amounts due under the contract; exercise the real rights for security; request repayment from a guarantor; or take any other procedures deemed necessary by the bank.
38 |
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The following individuals constitute our board of directors (our "Board") and executive management:
Name | Age | Position | ||
Dang Yu Pan | 50 | Chief Executive Officer and Chairman of the Board | ||
Sunny Pan | 41 | Chief Financial Officer and Corporate Secretary | ||
Xing Qun Liao | 38 | Chief Technology Officer | ||
Wen Liang Li | 52 | Director | ||
T. Joseph Fisher, III | 65 | Director | ||
Ping Li | 52 | Director | ||
Jie Wang | 54 | 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 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 20 years working in the battery industry, including over 15 years as an officer and director of SZ Highpower.
Sunny Pan has served as the Chief Financial Officer of the Company since February 2017 and was interim CFO prior to that, since August 7, 2016. From January 2016 to September 2017, Mr. Pan has been General Manager of HZ HTC. Mr. Pan joined the Company in January 2015 as its Finance Controller. Mr. Pan has over 20 years' experience in finance and IT management positions with several multi-national companies. Prior to joining the Company, Mr. Pan held positions with subsidiaries of Philips in China. From December 2013 to December 2014, Mr. Pan was Finance Controller and a director at Philips Luminaire Manufacturing (Shenzhen) Co., Ltd. and Finance Controller, managing director and legal representative at Philips Luminaire Manufacturing (Ningbo) Co., Ltd. and, from January 2011 to December 2013 he was Finance Controller at Philips Domestic Appliance & Personal Care Co., Ltd., Zhuhai. He has ACCA (UK) and CICPA (China) qualifications, and has extensive experience in OX IFRS/China GAAP/US GAAP. Mr. Pan received a B.S. in International Accounting from Shanxi Financial & Economical Institute in China in 1996, and an MBA from New York Institution of Technology.
Xing Qun Liao has served as Chief Technology Officer of the Company since June 2017. From June 2003 to September 2017, Mr. Liao has served as an engineer, R&D Manager, Chief Engineer, Deputy General Manager and General Manager of SZ Highpower. Since October 2017, Mr. Liao has been General Manager of HZ HTC. Mr. Liao received his Master and BA degrees in Central South University.
Wen Liang Li has been a director of Highpower International since November 2007 and a director of HKHTC since July 2003. From January 1996 to December 2002, Mr. Li served as Vice General Manager of Zhuhai Taiyi Battery Co., Ltd., a battery manufacturer. From November 2007 to June 2017, Wen Liang Li was Vice President, Chief Technology Officer of the Company and prior to that he held positions with the Company’s subsidiaries. Wen Liang Li remains as a director of the Company and continues working with the Company as Senior New Energy Scientist. 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 25 years of work experience in the battery industry, including 15 years as an officer and director of SZ Highpower, well qualify Mr. Li to serve on our Board.
39 |
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, and since July 2012 has been a director of Valence, which exited a chapter 11 bankruptcy in November 2013, and went private in December 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 33 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 in 1975, and an MBA in 1977 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.
Jie Wang was appointed to our Board on October 18, 2017. Dr. Wang has been Executive Director of the Stanford Center for Sustainable Development and Global Competitiveness since 2008, and Consulting Professor, Department of Civil and Environmental Engineering, since 2013. In addition, since 2003, Dr. Wang has been Director of the Stanford Sustainable Development and Environmental Informatics Group. Dr. Wang has held numerous positions with Stanford University, including as Consulting Associate Professor and Consulting Assistant Professor, Department of Civil and Environmental Engineering from 2005-2013 and 2003-2005, respectively, Executive Director, Stanford-China Executive Leadership Program from 2005-2010, Senior Architect of E-commerce, ITSS from 1998-2000, and Architect of Distributed Computing Environment, ITSS, from 1995-1998. From 2002 to 2005, Dr. Wang was Senior System Architect at Collation, Inc., an IT management software provider, which is now a subsidiary of IBM [NYSE: IBM], and from 2000 to 2002, he was Senior Architect of Loudcloud Inc. one of the first cloud computing service providers, which is now a subsidiary of Hewlett-Packard Enterprise [NYSE: HPE]. In collaboration with colleagues, Dr. Wang has published extensively on computational reasoning and learning models for smart infrastructures/smart manufacturing and their optimized services, management and engineering informatics and knowledge integration for intelligent social services, social and service computing, sustainable development and environmental informatics, decision making and knowledge management for research and educational collaborations, E-commerce and E-govemment, IT as a modern tool for business competitive strategy, smart manufacturing, and strategy and implementation of smart city and smart region. Dr. Wang holds Ph.D. and M.S. degrees in Civil and Environmental Engineering from Stanford University, an M.S. in Meteorology and Physical Oceanography from the University of Miami, FL, and a B.S. in Naval Architecture and Ocean Engineering from Shanghai Jiao Tong University, China. We believe that Dr. Wang’s qualifications to sit on our Board include his background and comprehensive research in automation software for IT, smart infrastructure/smart manufacturing, and information and communication technologies and that Dr. Wang will provide the Company with valuable insight as we expand to take advantage of opportunities to apply our niche expertise within the IoT industry.
Family Relationships
There are no family relationships among any of the officers and directors.
40 |
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, Jie Wang, 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 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
Our Board has three standing committees – an Audit Committee (our "Audit Committee"), a Compensation Committee (our "Compensation Committee"), and a Nominating Committee (our "Nominating Committee").
Audit Committee
We established our Audit Committee in January 2008. The Audit Committee consists of Jie Wang, 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 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. |
Our Board 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 Jie Wang and T. Joseph Fisher, III, each of whom is an independent director. 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. Our Board 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 Jie Wang 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, considers any nominations of director candidates validly made by stockholders, and reviews and considers developments in corporate governance practices. Our Board 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.
41 |
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, 2017, all directors, officers and more than 10% owners filed reports required by Section 16(a) of Exchange Act on a timely basis, except for the following: Xing Qun Liao filed a late Form 3 upon becoming an officer and Form 4 reporting an option grant; Wen Liang Li filed late Form 4 filings reporting three sales transactions; Ping Li filed one late Form 5 in March 2017, reporting a late Form 4 transaction that occurred in fiscal year 2015; and Wen Wei Ma filed one late Form 4 reporting a sale transaction.
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, 2017 and 2016 of the principal executive officer (our “named executive officers”).
Name and Position | Year | Salary |
Non-equity
Incentive Plan Awards |
Stock Awards
(1) |
Option
Awards (1) |
Total | ||||||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||||||
Dang Yu Pan | 2017 | 74,191 | 124,639 | 139,500 | 265,352 | 603,682 | ||||||||||||||||||
CEO and Chairman | 2016 | 70,000 | 70,000 | - | - | 140,000 | ||||||||||||||||||
Sunny Pan | 2017 | 75,007 | 65,935 | 93,000 | 226,242 | 460,184 | ||||||||||||||||||
Chief Financial Officer | 2016 | 65,400 | 37,000 | - | - | 102,400 | ||||||||||||||||||
Wen Liang Li | 2017 | 98,154 | 47,441 | 93,000 | 102,058 | 340,653 | ||||||||||||||||||
Former Vice President, Chief Technology Officer and Director (2) | 2016 | 71,400 | 54,200 | - | - | 125,600 | ||||||||||||||||||
Xing Qun Liao | ||||||||||||||||||||||||
Chief Technology Officer (3) | 2017 | 59,797 | 54,095 | - | 204,117 | 318,009 |
(1) |
Represents the full grant date fair value computed in accordance with Financial Accounting Standards Board (FASB) ASC Topic 718. For assumptions used in calculation of awards, see Note 19 (Share Based Payment) to our consolidated financial statements included in this Annual Report on Form 10-K. |
(2) | Mr. Li resigned as Vice President, Chief Technology Officer of the Company on June 12, 2017 but remain as a director of the Company and continues working with the Company as Senior New Energy Scientist. | |
(3) | Mr. Liao was appointed Chief Technology Officer in June 2017. |
Bonus is based on performance. Key performance indicators, as criteria for determining bonuses include corporate profitability, net sales, net income, gross profit, efficiency and improvement, cost control and corporate milestone achievements.
On February 12, 2017, Sunny Pan was granted 15,000 options with an exercise price of $2.20 per share vesting one-third on each anniversary date of the grant beginning February 12, 2018.
42 |
On September 22, 2017, the Company granted the following awards, as applicable: Dang Yu Pan - 30,000 shares of restricted stock and 84,500 options; Sunny Pan - 20,000 shares of restricted stock and 65,000 options; Wen Liang Li - 20,000 shares of restricted stock and 32,500 options; and Xing Qun Liao - 65,000 options. The options have an exercise price of $4.65 per share and the awards vest over a three year period on the anniversary date of the grant at 30%, 30% and 40%, respectively, with the entire 30% vesting on the first anniversary of the grant, and thereafter on each subsequent anniversary date of the grant, the awards vest in equal installments on a 1/12 th basis each month per year for the applicable percentage. The Company did not grant any equity awards to the named executive officers during 2016.
Director Compensation
The following table shows information regarding the compensation earned during the fiscal year ended December 31, 2017 by members of our Board. 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 (1) |
Stock
Awards (2) |
Option
Awards (2) |
Total | ||||||||||||
$ | $ | $ | $ | |||||||||||||
T. Joseph Fisher, III | 36,000 | 69,750 | - | 105,750 | ||||||||||||
Ping Li | 41,000 | 69,750 | - | 110,750 | ||||||||||||
Xin Hai Li (3) | 18,500 | - | - | 18,500 | ||||||||||||
Jie Wang (4) | 5,000 | - | - | 5,000 |
(1) | Includes fees paid as a member of the Special Committee, as further described below. |
(2) | Represents the full grant date fair value computed in accordance with FASB ASC Topic 718. For assumptions used in calculation of awards, see Note 19 (Share Based Payment) to our consolidated financial statements included in this Annual Report on Form 10-K. |
(3) | Mr. Li resigned from the Board effective October 13, 2017. |
(4) | On October 18, 2017, the board of directors of the Company appointed Dr. Jie Wang as a director, effective as of such date. Dr. Wang was also appointed to the Audit, Compensation and Nominating Committees of the Board. The compensation was accrued but not yet paid Dr. Wang. |
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.
In November 2015, the Board formed a Special Committee to review and consider the non-binding investment letter from Anshan Co-operation (Group) Co., Ltd.. The members of the Special Committee were Ping Li, chairman, Xinhai Li and T. Joseph Fisher, III. Each member of the Special Committee received a monthly payment of $3,000 or $4,000, as applicable, and the chairman received a monthly payment of $5,000. The Special Committee was dissolved in March 2017.
On September 22, 2017, the Company granted to each of T. Joseph Fisher, III, Ping Li and Xin Hai Li awards of 15,000 shares of restricted stock. The awards vest over a three year period on the anniversary date of the grant at 30%, 30% and 40%, respectively, with the entire 30% vesting on the first anniversary of the grant, and thereafter on each subsequent anniversary date of the grant, the awards vest in equal installments on a 1/12 th basis each month per year for the applicable percentage. Upon his resignation from the Board effective October 13, 2017, Xin Hai Li’s shares of unvested restricted stock granted on September 22, 2017 terminated.
43 |
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of December 31, 2017 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 | 915,042 | $ | 4.07 | 2,250,000 | ||||||||
Equity compensation plans not approved by security holders | - | - | - | |||||||||
Total | 915,042 | $ | 4.07 | 2,250,000 |
As of April 4, 2018, there were 2,209,500 shares available for issuance pursuant to the Plan.
44 |
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 April 4, 2018, 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 April 4, 2018 certain information with respect to beneficial ownership of our common stock based on 15,509,658 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 April 4, 2018 excludes 3,165,042 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 |
Amount and Nature of
Beneficial Ownership |
Percent of
Class |
||||||
5% Stockholders | ||||||||
Renaissance Technologies LLC
800 Third Avenue, NY, NY 10022 |
1,090,700 | (1) | 7.0 | % | ||||
Directors and Executive Officers | ||||||||
Dang Yu Pan | 3,092,773 | (2) | 19.9 | % | ||||
Wen Liang Li | 1,501,117 | 9.7 | % | |||||
Sunny Pan | 25,000 | (3) | * | |||||
T. Joseph Fisher III | 51,000 | (3) | * | |||||
Ping Li | 15,000 | * | ||||||
Jie Wang | - | - | ||||||
Xing Qun Liao | - | - | ||||||
Officers and Directors as a Group (total of 7 persons) | 4,684,890 | (3) | 30.2 | % |
* | Indicates beneficial ownership of less than1.0%. |
(1) | According to a Schedule 13G filed with the SEC on February 14, 2018, Renaissance Technologies LLC (“RTC”) is majority owned by Renaissance Technology Holdings Corporation (“RTHC”). Each of RTC and RTHC have sole voting and dispositive power over 1,090,700 shares. |
(2) | Includes 269,959 shares held by a company that is 100% owned by Dang Yu Pan. |
(3) | For Mr. Pan, includes 5,000 shares underlying vested options. For Mr. Fisher, includes 15,000 shares underlying options. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Subsidiaries of Highpower International, Inc.
45 |
HKHTC, a wholly-owned subsidiary of Highpower International, Inc., and each of HKHTC’s direct and indirect wholly-owned subsidiaries, SZ Highpower, HZ HTC, SZ Springpower 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 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, 2017 and the guarantors of each loan:
Name of Bank |
Amount
Granted |
Unused
line of credit |
Maturity date | Guaranteed by | ||||||||
$ | $ | |||||||||||
Ping An Bank Co., Ltd. (1) | 10,756,158 | 3,130,042 | 3/16/2018 | Dang Yu Pan | ||||||||
Industrial and Commercial Bank of China (1) | 7,682,970 | 6,146,376 | 8/31/2018 | Dang Yu Pan | ||||||||
Jiang Su Bank Co., Ltd. (1) | 3,841,485 | 113,708 | 4/19/2018 | Dang Yu Pan | ||||||||
Jiang Su Bank Co., Ltd. (2) | 2,560,990 | 7,171 | 7/2/2018 |
Dang Yu Pan
Zhou Tao Yin |
||||||||
Industrial Bank Co., Ltd. (1) | 3,073,188 | 517,832 | 9/20/2018 | Dang Yu Pan | ||||||||
Guangdong Huaxing Bank (1) | 9,219,564 | 3,543,386 | 9/27/2018 | Dang Yu Pan | ||||||||
Hua Xia Bank Co., Ltd. (2) | 7,682,970 | 4,745,002 | 10/23/2018 |
Dang Yu Pan
Zhou Tao Yin |
||||||||
China Minsheng Banking Corp., Ltd. (1) | 5,121,980 | 1,280,495 | 11/14/2018 | Dang Yu Pan | ||||||||
Bank of China (1) | 13,445,197 | 8,279,168 | 7/11/2019 | Dang Yu Pan | ||||||||
Bank of China (1) | 12,292,752 | 3,366,677 | 7/12/2019 | Dang Yu Pan | ||||||||
Bank of China (1) | 4,097,584 | 143,928 | 7/25/2019 | Dang Yu Pan | ||||||||
Total | 79,774,838 | 31,273,785 |
(1) | The lines of credits are guaranteed by the Company’s Chief Executive Officer, Mr. Dang Yu Pan. |
(2) | The lines of credit are guaranteed by the Company’s Chief Executive Officer, Mr. Dang Yu Pan, and his wife. |
As of December 31, 2017, the bank borrowings in the above table were for working capital and capital expenditure purposes. These borrowings were secured by the land use right with a carrying amount of $2,639,631, the buildings with a carrying amount of $9,621,537. The loans as of December 31, 2017 were primarily obtained from two banks with interest rates ranging from 5.000% to 5.8725% per annum. The interest expenses were $909,878 and $925,115 for the years ended December 31, 2017 and 2016, respectively.
In 2017, the Company obtained borrowings from a third party non-financial institution in amount of $1,536,594 and an individual in an amount of $9,219,564, which were used for working capital and capital expenditure purposes. The interest rates for the borrowings were 5.655% and 5.66% per annum, respectively, and the borrowings must be repaid anytime no later than December 31, 2019 and January 10, 2018, respectively. The borrowings are personally guaranteed by the Company’s Chief Executive Officer, Mr. Dang Yu Pan. For the year ended December 31, 2017, the Company paid $3,857,910 back in total to the third party non-financial institution and an individual. The interest expenses of the above borrowings were $622,694 and $157,740 for the years ended December 31, 2017 and 2016, respectively.
On October 20, 2017, SZ Highpower entered into a working capital loan contract with Bank of China, Buji Sub-branch providing for an aggregate loan of RMB10,000,000 ($1,536,594) to be used by SZ Highpower to purchase raw materials. The term of the loan is 12 months from the first withdrawal date. SZ Highpower must withdraw the facility before October 25, 2017 one-time, after which time the bank may cancel all or part of the facility. The interest rate will equal the one year benchmarked by interbank rates, plus 1.355% on all outstanding loan amounts. The loan is guaranteed by SZ Springpower and our Chief Executive Officer, Dang Yu Pan. The Company’s real estate properties and land use rights in Huizhou also serve as collateral for the loan.
46 |
On October 20, 2017, SZ Springpower entered into a working capital loan contract with Bank of China, Buji Sub-branch providing for an aggregate loan of RMB10,000,000 ($1,536,594) to be used by SZ Springpower to purchase raw materials. The term of the loan is 12 months from the first withdrawal date. SZ Springpower must withdraw in 30 days from October 24, 2017, after which time the bank may cancel all or part of the facility. The interest rate will equal the one year benchmarked by interbank rates, plus 1.355% on all outstanding loan amounts. The loan is guaranteed by SZ Highpower, HZ HTC and our Chief Executive Officer, Dang Yu Pan.
On September 28, 2017, ICON entered into a working capital loan contract with Bank of China, Buji Sub-branch, providing for an aggregate loan of RMB10,000,000 ($1,536,594) to be used by ICON to purchase raw materials. ICON must withdraw in 30 days from September 29, 2017. ICON must pay back the loans before the maturity day on September 29, 2018. The interest rate is 5.8725%, which equals to the one year benchmarked by interbank rates, plus 1.5725% on all outstanding loan amounts. The loan is guaranteed by the SZ Springpower, SZ Highpower, HZ HTC and our Chief Executive Officer, Dang Yu Pan.
On August 3, 2017, SZ Springpower entered into a working capital loan contract with Industrial and Commercial Bank of China Ltd., Shenzhen Henggang Sub-branch providing for an aggregate loan of RMB10,000,000 ($1,536,594). SZ Springpower must pay back the loans before the maturity day on July 13, 2018. The interest rate is 5%, which equals to the one year benchmarked by interbank rates, plus 0.07% on all outstanding loan amounts.The loan is guaranteed by HZ HTC, HK HTC, SZ HTC and our Chief Executive Officer, Dang Yu Pan. The Company’s building in Shenzhen also serves as collateral for the loan.
On February 16, 2017, SZ Highpower entered into a working capital loan contract with Bank of China, Buji Sub-branch providing for an aggregate loan of RMB10,000 ($1,537) to be used by SZ Highpower to purchase raw materials. The term of the loan is 10 months from the first withdrawal date. SZ Highpower must withdraw in 30 days from February 16, 2017, after which time the bank may cancel all or part of the facility. The interest rate will equal the one year benchmarked by interbank rates, plus 0.92% on all outstanding loan amounts. The loan is guaranteed by SZ Springpower and our Chief Executive Officer, Dang Yu Pan. The Company’s real estate properties and land use rights in Huizhou also serve as collateral for the loan.
On December 22, 2016, SZ Highpower entered into a working capital loan contract with Industrial and Commercial Bank of China Ltd., Shenzhen Henggang Sub-branch, providing for an aggregate loan of RMB20,000,000 ($3,073,188) to be used for current funds for production and operations by SZ Highpower. The term of the loan is 12 months from the first withdrawal date. The interest rate is 4.35%. The loan is guaranteed by SZ Springpower, HKHTC and our Chief Executive Officer, Dang Yu Pan.
Also see Note 16. Short-term loans, Note 17. Non-financial institution borrowings, Note 18. Lines of credit and Note 26. Related party balance and transaction in the Notes to Consolidated Financial Statements.
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 between the Company and any person that is an officer, key employee, director or affiliate of the Company, 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.
47 |
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, 2017 and 2016.
For the years ended December 31, | ||||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Audit Fees (1) | 192,487 | 219,547 | ||||||
Audit-Related Fees | - | - | ||||||
Tax Fees | - | - | ||||||
All Other Fees | - | - | ||||||
Total | 192,487 | 219,547 |
(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 2017 and 2016.
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 minimis standard established by the committee, which are rendered to the Company by its outside auditors (including fees).
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. |
None.
48 |
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 April 4, 2018.
Highpower International, Inc. | ||
(Registrant) | ||
Dated: April 4, 2018 | /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 | April 4, 2018 | |||
/s/ Dang Yu Pan | Chairman of the Board | |||
By: Dang Yu Pan | (Principal Executive Officer) | |||
/s/ Sunny Pan | Chief Financial Officer | April 4, 2018 | ||
By: Sunny Pan | (Principal Financial and Accounting Officer) | |||
/s/ Wen Liang Li | Director | April 4, 2018 | ||
By: Wen Liang Li | ||||
/s/ Jie Wang | Director | April 4, 2018 | ||
By: Jie Wang | ||||
/s/ T. Joseph Fisher III | Director | April 4, 2018 | ||
By: T. Joseph Fisher III | ||||
/s/ Ping Li | Director | April 4, 2018 | ||
By: Ping Li |
49 |
50 |
51 |
52 |
53 |
54 |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase 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 as amended 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 as amended, or the Securities Exchange Act of 1934 as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filings. |
+ | Confidential treatment has been requested for certain confidential portions of this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. |
55 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F- 1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Highpower International, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Highpower International, Inc. and Subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum Bernstein & Pinchuk llp | |
Marcum Bernstein & Pinchuk llp | |
We have served as the Company’s auditor since 2011 . | |
Guangzhou, China |
|
April 4, 2018 |
F- 2 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)
F- 3 |
HIGHPOWER INTERNATIONAL, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Stated in US Dollars)
December 31, | December 31, | |||||||
2017 | 2016 | |||||||
$ | $ | |||||||
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, 15,509,658 shares issued and outstanding at December 31, 2017 and 15,114,991 shares issued and outstanding at December 31, 2016) | 1,551 | 1,511 | ||||||
Additional paid-in capital | 12,709,756 | 11,580,934 | ||||||
Statutory and other reserves | 6,549,815 | 4,992,463 | ||||||
Retained earnings |
4 4,481,568 |
29,266,068 | ||||||
Accumulated other comprehensive income (loss) | 3,469,495 | (873,582 | ) | |||||
Total equity attributable to the stockholders of Highpower International Inc. |
6 7,212,185 |
44,967,394 | ||||||
Non-controlling interest | - | 329,343 | ||||||
TOTAL EQUITY | 6 7,212,185 | 45,296,737 | ||||||
TOTAL LIABILITIES AND EQUITY | 220,264,538 | 163,331,750 |
See notes to consolidated financial statements
F- 4 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Stated in US Dollars)
For the years ended December 31, | ||||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Net sales | 244,166,312 | 173,851,113 | ||||||
Cost of sales | (196,792,444 | ) | (135,768,642 | ) | ||||
Gross profit | 47,373,868 | 38,082,471 | ||||||
Research and development expenses | (9,512,074 | ) | (9,243,750 | ) | ||||
Selling and distribution expenses | (7,500,560 | ) | (6,888,052 | ) | ||||
General and administrative expenses | (15,393,791 | ) | (18,186,362 | ) | ||||
Foreign currency transaction (loss) gain | (2,390,417 | ) | 1,959,036 | |||||
Total operating expenses | (34,796,842 | ) | (32,359,128 | ) | ||||
Income from operations | 12,577,026 | 5,723,343 | ||||||
Changes in fair value of warrant liability | 259 | 140,290 | ||||||
Changes in fair value of foreign exchange derivatives | 273,496 | - | ||||||
Government grants | 1,357,852 | 1,762,266 | ||||||
Other income | 458,247 | 509,262 | ||||||
Equity in earnings of investee | 107,243 | 351,755 | ||||||
Gain on dilution in equity method investee | 500,270 | - | ||||||
Gain on sale of long-term investment | 1,677,367 | - | ||||||
Gain on deconsolidation of a subsidiary | 6,004,008 | - | ||||||
Interest expenses | (1,426,547 | ) | (1,419,962 | ) | ||||
Income before income taxes | 21,529,221 | 7,066,954 | ||||||
Income taxes expenses |
( 4,315,325 |
) | (1,439,177 | ) | ||||
Net income |
1 7,213,896 |
5,627,777 | ||||||
Less: net income (loss) attributable to non-controlling interest | 441,044 | (490,150 | ) | |||||
Net income attributable to the Company |
1 6,772,852 |
6,117,927 | ||||||
Comprehensive income | ||||||||
Net income |
1 7,213,896 |
5,627,777 | ||||||
Foreign currency translation gain (loss) | 4,234,078 | (3,540,334 | ) | |||||
Comprehensive income |
21,447,974 |
2,087,443 | ||||||
Less: comprehensive income (loss) attributable to non-controlling interest | 479,098 | (524,140 | ) | |||||
Comprehensive income attributable to the Company |
20,968,876 |
2,611,583 | ||||||
Earnings per share of common stock attributable to the Company | ||||||||
- Basic |
1. 09 |
0.41 | ||||||
- Diluted |
1. 09 |
0.40 | ||||||
Weighted average number of common stock outstanding | ||||||||
- Basic | 15,326,797 | 15,105,235 | ||||||
- Diluted | 15,435,371 | 15,113,914 |
See notes to consolidated financial statements
F- 5 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY
(Stated in US Dollars)
Accumulated | ||||||||||||||||||||||||||||||||
Additional | other | |||||||||||||||||||||||||||||||
Common stock | paid-in | Statutory and | Retained | comprehensive | Non-controlling | |||||||||||||||||||||||||||
Shares | Amount | capital | other reserves | earnings | income | interest | Total | |||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Balance, December 31, 2015 | 15,101,679 | 1,510 | 11,227,979 | 4,042,429 | 24,098,175 | 2,632,762 | 853,483 | 42,856,338 | ||||||||||||||||||||||||
Proceeds from exercise of stock options | 13,312 | 1 | 35,009 | - | - | - | - | 35,010 | ||||||||||||||||||||||||
Foreign currency translation adjustments | - | - | - | - | - | (3,506,344 | ) | (33,990 | ) | (3,540,334 | ) | |||||||||||||||||||||
Share-based compensation expenses | - | - | 317,946 | - | - | - | - | 317,946 | ||||||||||||||||||||||||
Transfer to statutory and other reserves | - | - | - | 950,034 | (950,034 | ) | - | - | - | |||||||||||||||||||||||
Net income | - | - | - | - | 6,117,927 | - | (490,150 | ) | 5,627,777 | |||||||||||||||||||||||
Balance, December 31, 2016 | 15,114,991 | 1,511 | 11,580,934 | 4,992,463 | 29,266,068 | (873,582 | ) | 329,343 | 45,296,737 | |||||||||||||||||||||||
Proceeds from exercise of stock options | 294,667 | 30 | 802,661 | - | - | - | - | 802,691 | ||||||||||||||||||||||||
Foreign currency translation adjustments | - | - | - | - | - | 4,196,024 | 38,054 | 4,234,078 | ||||||||||||||||||||||||
Share-based compensation expenses | 100,000 | 10 | 326,161 | - | - | - | - | 326,171 | ||||||||||||||||||||||||
Transfer to statutory and other reserves | - | - | - | 1,705,747 | (1,705,747 | ) | - | - | - | |||||||||||||||||||||||
Net income | - | - | - | - | 16,772,852 | - | 441,044 | 17,213,896 | ||||||||||||||||||||||||
Deconsolidation of a subsidiary | - | - | - | (148,395 | ) | 148,395 | 147,053 | (808,441 | ) | (661,388 | ) | |||||||||||||||||||||
Balance, December 31, 2017 | 15,509,658 | 1,551 | 12,709,756 | 6,549,815 | 44,481,568 | 3,469,495 | - | 67,212,185 |
See notes to consolidated financial statements
F- 6 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in US Dollars)
For the years ended December 31, | ||||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Cash flows from operating activities | ||||||||
Net income |
1 7,213,896 |
5,627,777 | ||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | 5,290,980 | 4,937,688 | ||||||
Allowance for doubtful accounts | 58,728 | 1,651,546 | ||||||
Impairment of machinery and equipment | - | 530,914 | ||||||
Loss on disposal of property, plant and equipment | 48,976 | 609,842 | ||||||
Deferred taxes | 374,626 | (32,756 | ) | |||||
Changes in fair value of foreign exchange derivatives | (228,314 | ) | - | |||||
Gain on deconsolidation of a subsidiary | (6,004,008 | ) | - | |||||
Equity in earnings of investee | (107,243 | ) | (351,755 | ) | ||||
Gain on dilution in equity method investee | (500,270 | ) | - | |||||
Gain on sale of long-term investment | (1,677,367 | ) | - | |||||
Share based compensation | 326,171 | 317,946 | ||||||
Changes in fair value of warrant liability | (259 | ) | (140,290 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (11,926,311 | ) | (13,809,278 | ) | ||||
Other assets | (288,180 | ) | - | |||||
Notes receivable | (1,389,107 | ) | 575,514 | |||||
Advances to suppliers | (5,070,174 | ) | (72,470 | ) | ||||
Prepayments and other receivables | (673,006 | ) | (1,683,119 | ) | ||||
Amount due from related parties | 7,140,963 | (7,457,338 | ) | |||||
Amount due to related parties | (1,569,839 | ) | 1,589,963 | |||||
Inventories | (24,705,574 | ) | (4,410,429 | ) | ||||
Accounts payable | 15,183,933 | 11,196,709 | ||||||
Deferred income | 154,151 | (64,658 | ) | |||||
Other payables and accrued liabilities | 2,023,991 | 5,471,022 | ||||||
Income taxes payable |
2,240,550 |
307,984 | ||||||
Net cash flows (used in) provided by operating activities | (4,082,687 | ) | 4,794,812 | |||||
Cash flows from investing activities | ||||||||
Acquisitions of plant and equipment | (13,730,328 | ) | (8,487,473 | ) | ||||
Acquisition of long-term investment | - | (3,005,666 | ) | |||||
Loan to a related party | (514,821 | ) | - | |||||
Proceeds from sale of long-term investment | 10,535,062 | - | ||||||
Impact to cash resulting from deconsolidation of a subsidiary | (632,754 | ) | - | |||||
Net cash flows used in investing activities | (4,342,841 | ) | (11,493,139 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from short-term bank loans | 12,725,676 | 19,611,969 | ||||||
Repayments of short-term bank loans | (22,331,365 | ) | (13,526,998 | ) | ||||
Proceeds from non-financial institution borrowings | 10,386,681 | 4,508,499 | ||||||
Repayments of non-financial institution borrowings | (3,857,910 | ) | (601,133 | ) | ||||
Repayment of long-term bank loans | - | (1,803,399 | ) | |||||
Proceeds from notes payable | 90,871,294 | 59,952,794 | ||||||
Repayments of notes payable | (69,511,376 | ) | (57,731,108 | ) | ||||
Proceeds from exercise of employee options | 802,691 | 35,010 | ||||||
Repayment from GZ Highpower | 6,035,600 | - | ||||||
Change in restricted cash | (13,498,698 | ) | (320,093 | ) | ||||
Net cash flows provided by financing activities | 11,622,593 | 10,125,541 | ||||||
Effect of foreign currency translation on cash | 1,980,713 | 47,212 | ||||||
Net increase in cash | 5,177,778 | 3,474,426 | ||||||
Cash - beginning of year | 9,324,393 | 5,849,967 | ||||||
Cash - end of year | 14,502,171 | 9,324,393 | ||||||
Supplemental disclosures for cash flow information: | ||||||||
Cash paid for: | ||||||||
Income taxes | 1,700,149 | 1,163,950 | ||||||
Interest expenses | 1,550,878 | 1,229,173 | ||||||
Non-cash investing and financing activities: | ||||||||
Offset of deferred income related to government grant and property, plant and equipment | 263,948 | 229,951 | ||||||
Transfer of equipment to Yipeng | - | 7,156,717 |
See notes to consolidated financial statements
F- 7 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
1. | Principal activities and organization |
The consolidated financial statements include the financial statements of Highpower International, Inc. ("Highpower") and its 100%-owned subsidiary Hong Kong Highpower Technology Company Limited (“HKHTC”), HKHTC’s wholly-owned subsidiary Shenzhen Highpower Technology Company Limited (“SZ Highpower”), SZ Highpower’s wholly owned subsidiary Huizhou Highpower Technology Company Limited (“HZ HTC”) and SZ Highpower’s and HKHTC’s jointly owned subsidiaries, Springpower Technology (Shenzhen) Company Limited (“SZ Springpower”) and Icon Energy System Company Limited (“ICON”). Highpower and its direct and indirect wholly owned 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 December 11, 2017, GZ Highpower signed an Agreement on Capital Increase and Share Enlargement (the “Agreement”) with Xiamen Tungsten Co., Ltd. ("Xiamen Tungsten") and Mr. Ou, the General Manager of GZ Highpower. Pursuant to the terms of the Agreement, GZ Highpower will receive a total of RMB92.8 million (approximately $14.3 million), including RMB78.9 million (approximately $12.1 million) from Xiamen Tungsten in exchange for 55.294% ownership of GZ Highpower (the “Transaction”). The Transaction was completed on December 21, 2017 upon the receipt of the payments by GZ Highpower. After the Transaction, SZ Highpower holds 31.294% of the equity interest of GZ Highpower. The Company no longer holds the controlling equity interest of GZ Highpower and deconsolidated GZ Highpower on December 21, 2017.
The Company’s principal activities are described as follows:
Name of company |
Place and date
incorporation |
Principal activities | ||
HKHTC |
Hong Kong July 4, 2003 |
Investment holding and marketing of batteries | ||
SZ Highpower |
PRC October 8, 2002 |
Manufacturing, marketing and research of Ni-MH batteries | ||
SZ Springpower |
PRC June 4, 2008 |
Manufacturing, marketing and research of lithium batteries | ||
ICON |
PRC February 23, 2011 |
Design and production of advanced battery packs and systems | ||
HZ HTC |
PRC March 8, 2012 |
Manufacturing, marketing and research of lithium batteries |
F- 8 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(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 Highpower and its direct and indirect wholly subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. The Company deconsolidates a subsidiary as of the date the Company ceases to have a controlling financial interest in that subsidiary. In 2017, the Company deconsolidated GZ Highpower (See Note 12).
Reclassification
The Company has reclassified certain comparative balances in the consolidated balance sheet for December 31, 2016 and comparative balance in the consolidated statements of operations and comprehensive income to conform to the current period’s presentation. The reclassification includes the segregation of: 1) the balance of long-term prepayments related to the advances paid to equipment suppliers from the balance of prepayments and other receivables; 2) the balance of advances to suppliers related to raw materials from the balance of prepayments and other receivables; and 3) the amount of government grants from other income. The reclassification did not have an impact on the reported total assets, liabilities, stockholders’ equity and operations and comprehensive income.
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 the allowance for doubtful receivables; recoverability of the carrying amount of inventory; fair value of financial instruments; provisional amounts based on reasonable estimates for certain income tax effects of the Tax Cuts and Jobs Act (the “Tax Act”) 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 with the consideration of credit insurance 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.
No customer accounted for 10% or more of net sales during the years ended December 31, 2017 and 2016.
No supplier accounted for or over 10% of our total purchase amount during the years ended December 31, 2017 and 2016.
There was one major customer accounted for 10.1% of the accounts receivable as of December 31, 2017. There was no customer accounted for 10% or more of the accounts receivable as of December 31, 2016.
F- 9 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
2. | Summary of significant accounting policies (continued) |
Cash
Cash include all cash on hand and cash in bank with no restrictions.
Restricted cash
Restricted cash include time deposit pledged for bank loan facilities within one-year maturities, cash deposit for bank acceptance bills within six-month maturities and special bank accounts required by government grant.
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. The Company analyzes the aging of the customer accounts, coverage of credit insurance, customer concentrations, customer credit-worthiness, historical and current economic trends and changes in its customer payment patterns when evaluating the adequacy of the allowance for doubtful accounts.
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 net realizable value. Cost is determined using the weighted average method. Inventories include 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.
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 net realizable value. The Company wrote down inventories of $1,109,702 and $87,236 for the years ended December 31, 2017 and 2016, respectively.
F- 10 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
2. | Summary of significant accounting policies (continued) |
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:
Buildings | 20-40 years |
Furniture, fixtures and office equipment | 5 years |
Leasehold improvement | Shorter of the remaining lease terms or estimated useful lives |
Machinery and equipment | 10 years |
Motor vehicles | 5 years |
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.
Long-term investments
For an investee over which the Company holds less than 20% voting interest and has no ability to exercise significant influence, the investments are accounted for under the cost method.
For an investee over which the Company has the ability to exercise significant influence, but does not have a controlling interest, the Company accounted for those using the equity method. Significant influence is generally considered to exist when the Company has an ownership interest in the voting stock of the investee between 20% and 50%. Other factors, such as representation on the investee’s board of directors, voting rights and the impact of commercial arrangements, are also considered in determining whether the equity method of accounting is appropriate.
An impairment charge is recorded if the carrying amount of the investment exceeds its fair value and this condition is determined to be other-than temporary. As of December 31, 2017 and 2016, management believes no impairment charge is necessary.
Land use rights
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 50 years the rights are granted.
F- 11 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
2. | Summary of significant accounting policies (continued) |
Other assets
Other assets represent the long-term rental deposits and a royalty-bearing, non-exclusive license to use certain patents owned by an unrelated party ("License Provider"), 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 License Provider to manufacture, sell and distribute Consumer Batteries.
Government grants
Conditional government grants are recognized as deferred income when received. 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, 2017 and 2016, the Company recorded deferred income of $309,638 and $761,491, 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 in the period in which they become receivable. Approximately $1,357,852 and $1,762,266 government grant were recognized for the years ended December 31, 2017 and 2016, respectively.
Impairment of long-lived assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Company would recognize an impairment loss, which is the excess of carrying amount over the fair value of the assets, using the expected future discounted cash flows.
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 of product by customer. 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 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 sales consists primarily of material costs, labor costs, depreciation and related expenses, which are directly attributable to the production of products. Write-down of inventories to lower of cost or net realizable value is also recorded in cost of sales.
F- 12 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
2. | Summary of significant accounting policies (continued) |
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.
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 recorded at the fair value on the measurement date. The measurement of stock-based compensation at fair value is subject to periodic adjustment at each reporting period.
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. Interest and penalties related to uncertain tax positions are recognized and recorded as necessary in the provision for income taxes. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances, where the underpayment of taxes is more than RMB 100,000. In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion. There were no uncertain tax positions as of December 31, 2017 and 2016 and the Company does not believe that its unrecognized tax benefits will change over the next twelve months.
Comprehensive income
Comprehensive income is comprised of the Company’s net income and other comprehensive income. The component of other comprehensive income or loss is consisted solely of foreign currency translation adjustments, net of the income tax effect.
F- 13 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
2. | Summary of significant accounting policies (continued) |
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$"). The functional currency of Highpower's other direct and indirect wholly owned subsidiaries in the PRC is the Renminbi ("RMB").
Most of the Company’s oversea sales are priced and settled with US$. 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 earnings 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 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) Lithium Business; (ii) Ni-MH Batteries and Accessories; and (iii) New Material.
Fair value of financial instruments
The carrying values of the Company’s financial instruments, including cash, restricted cash, trade and other receivables, deposits, trade and other payables and short-term borrowings, approximate their fair value due to the short-term maturity of such instruments.
ASC Topic 820 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.
ASC Topic 820 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.
F- 14 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
2. | Summary of significant accounting policies (continued) |
Fair value of financial instruments (continued)
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.
Foreign Exchange 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 statements of operations. The derivatives asset is recognized in the balance sheet at the fair value (level 2).
Warrant Liability
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 warrant liability is recognized in the balance sheet at the fair value (level 3). The fair value of these warrants have been determined using the Black-Scholes pricing mode. 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. The Company revalued the warrants utilizing a binomial model as of December 31, 2016 with no material difference in the value. The warrants expired on April 17, 2017.
Earnings per share
Basic earnings per share (“EPS”) is 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.
F- 15 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
2. | Summary of significant accounting policies (continued) |
Recently issued accounting pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which was subsequently modified in August 2015 by ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date. This guidance will be effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2017. The core principle of ASU 2014-09 is that companies should recognize revenue when the transfer of promised goods or services to customers occurs in an amount that reflects what the company expects to receive. It requires additional disclosures to describe the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers. In 2016, the FASB issued additional ASUs that clarify the implementation guidance on principal versus agent considerations (ASU 2016-08), on identifying performance obligations and licensing (ASU 2016-10), and on narrow-scope improvements and practical expedients (ASU 2016-12) as well as on the revenue recognition criteria and other technical corrections (ASU 2016-20). In 2017, the FASB issued Accounting Standards Update (ASU) 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), which was originally issued in ASU 2014-09. The amendments in this Update require that an entity to initially measure a retained non-controlling interest in a nonfinancial asset at fair value consistent with a how a retained non-controlling interest in a business is measured.
During 2017, the Company made significant progress toward its evaluation of the potential changes from adopting the new standard on its future financial reporting and disclosures. The Company has established a cross-functional implementation team on assessment on the five-step model of the new standard to its revenue contracts.
Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. It also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. The standard also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
Management has adopted this standard effective January 1, 2018 using the modified-retrospective approach, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. The Company also estimates there will not be a material impact to the beginning balance of retained earnings.
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740). Balance Sheet Classification of Deferred Taxes which requires entities to present deferred tax assets and deferred tax liabilities as noncurrent on the consolidated balance sheet. The Company adopted this guidance effective January 1, 2017 and it was applied retrospectively for all prior periods.
On February 25, 2016, the FASB issued ASU 2016-02, Leases (Topic 842). It requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all public business entities and all nonpublic business entities upon issuance. The Company is currently evaluating the impact of adopting ASU 2016-02 on its consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). The amendments in this update provide guidance on eight specific cash flow issue. It applies to all entities. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial condition, results of operations or cash flows.
F- 16 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
2. | Summary of significant accounting policies (continued) |
Recently issued accounting pronouncements (continued)
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740). The amendments in this Update is to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory and align the recognition of income tax consequences for intra-entity transfers of assets other than inventory with International Financial Reporting Standards (IFRS). Public business entities should apply the amendments in ASU 2016-16 for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial condition, results of operations or cash flows.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230). The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial condition, results of operations or cash flows.
In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220). The amendments in this Update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this Update also require certain disclosures about stranded tax effects. Public business entities should apply the amendments in ASU 2018-02 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The Company is currently evaluating the impact of adopting ASU 2018-02 on its consolidated financial statements.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.
F- 17 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
3. | Restricted cash |
December 31, | December 31, | |||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Securities for bank acceptance bill | 21,837,690 | 10,541,105 | ||||||
Time deposit | 3,982,226 | 151,083 | ||||||
Government subsidy deposit | 134,030 | 521,452 | ||||||
25,953,946 | 11,213,640 |
As of December 31, 2017, cash of $21.8 million was restricted by eight banks for bank acceptance bill, cash of $4.0 million was restricted for short-term bank loan and cash of $0.1 million was restricted under supervision by the Government due to government subsidy granted.
As of December 31, 2016, cash of $10.5 million was restricted by five banks for bank acceptance bill, cash of $0.2 million was restricted for short-term bank loan and cash of $0.5 million was restricted under supervision by the Government due to government subsidy granted.
4. | Accounts receivable, net |
December 31, | December 31, | |||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Accounts receivable | 61,431,785 | 49,460,347 | ||||||
Allowance for doubtful accounts | (3,178,786 | ) | (3,179,578 | ) | ||||
58,252,999 | 46,280,769 |
The Company recorded bad debt expense of $58,728 and $1,176,208 for the years ended December 31, 2017 and 2016, respectively. The Company write-off accounts receivable against the allowance for doubtful accounts of $100,213 and $42,897 for the years ended December 31, 2017 and 2016, respectively.
5. | Advances to suppliers |
Balances of advances to suppliers were $6,050,531 and $2,007,184 as of December 31, 2017 and 2016, respectively, which represented prepayments to suppliers for raw material.
6. | Prepayments and other receivables |
December 31, | December 31, | |||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Value-added tax (“VAT”) prepayment | 3,132,236 | 1,100,319 | ||||||
Rental deposit | 12,523 | 266,883 | ||||||
Prepaid insurance fee | 6,098 | 259,113 | ||||||
Advances to staff for daily operations | 180,850 | 81,502 | ||||||
Compensation receivable for land occupation | 486,019 | 455,115 | ||||||
Other receivables from third parties (1) | 444,263 | 1,508,278 | ||||||
Prepaid expense | 492,557 | 477,925 | ||||||
4,754,546 | 4,149,135 | |||||||
Less: allowance for doubtful accounts | 486,019 | 455,115 | ||||||
4,268,527 | 3,694,020 |
(1) Other receivables from third parties represented the receivable of equipment deposit from an equipment supplier as of December 31, 2017. Other receivables from third parties represented payment of $532,389 due on demand and the receivable of equipment deposit from an equipment supplier of $975,889 as of December 31, 2016.
F- 18 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
7. | Long-term prepayments |
Balances of long-term prepayments were $3,715,445 and $1,198,668 as of December 31, 2017 and 2016, respectively, which represented prepayments for equipment purchases.
8. | Inventories |
December 31, | December 31, | |||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Raw materials | 21,428,315 | 6,492,755 | ||||||
Work in progress | 6,931,486 | 4,878,856 | ||||||
Finished goods | 14,284,563 | 10,608,180 | ||||||
Packing materials | 36,797 | 21,083 | ||||||
Consumables | 265,483 | 206,459 | ||||||
42,946,644 | 22,207,333 |
9. Property, plant and equipment, net
December 31, | December 31, | |||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Cost | ||||||||
Construction in progress | 1,330,643 | 715,188 | ||||||
Furniture, fixtures and office equipment | 5,794,983 | 4,025,635 | ||||||
Leasehold improvement | 7,080,409 | 5,865,909 | ||||||
Machinery and equipment | 33,176,416 | 27,526,572 | ||||||
Motor vehicles | 1,498,605 | 1,496,628 | ||||||
Building | 20,169,197 | 21,797,158 | ||||||
69,050,253 | 61,427,090 | |||||||
Less: accumulated depreciation | 22,529,477 | 17,922,099 | ||||||
46,520,776 | 43,504,991 |
The Company recorded depreciation expenses of $5,152,396 and $4,797,968 for the years ended December 31, 2017 and 2016, respectively.
During the years ended December 31, 2017 and 2016, deferred income related to government grants of $263,948 and $229,951, respectively, was reduced from the carrying amount of property, plant and equipment.
During the years ended December 31, 2017 and 2016, the Company recorded nil and $530,914 of impairment loss of machinery and equipment, respectively.
The buildings comprising the Huizhou facilities were pledged as collateral for bank loans as of December 31, 2017 and 2016. The net carrying amounts of the buildings were $9,224,694 and $8,864,837 as of December 31, 2017 and 2016, respectively.
The building located in Longgang, Shenzhen, Guangdong was pledged as collateral for bank loans as of December 31, 2017 and 2016. The net carrying amount of the buildings was $396,843 and $394,640 as of December 31, 2017 and 2016, respectively.
The buildings comprising the Ganzhou facilities were pledged as collateral for short-term loans and bank acceptance bills drawn under certain lines of credit as of December 31, 2016. The carrying amount of the building was $2,594,975 as of December 31, 2016 (See Note 12).
F- 19 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
10. | Land use rights, net |
December 31, | December 31, | |||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Cost | ||||||||
Land located in Huizhou | 3,299,539 | 3,089,739 | ||||||
Land located in Ganzhou | - | 1,205,368 | ||||||
3,299,539 | 4,295,107 | |||||||
Accumulated amortization | (659,908 | ) | (672,672 | ) | ||||
Net | 2,639,631 | 3,622,435 |
As of December 31, 2017, land use right included certain parcel of land located in Huizhou City, Guangdong Province, PRC. Land use rights for land in Huizhou City with an area of approximately 126,605 square meters will expire on May 23, 2057. As of December 31, 2016, land use right also included certain parcel of land located in Ganzhou City, Jiangxi Province, PRC. Land use rights for land in Ganzhou City with an area of approximately 58,669 square meters will expire on January 4, 2062 (See Note 12).
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:
For the years ending December 31, | $ | |||
2018 | 63,724 | |||
2019 | 63,724 | |||
2020 | 63,724 | |||
2021 | 63,724 | |||
2022 | 63,724 | |||
Thereafter | 2,321,011 | |||
2,639,631 |
The Company recorded amortization expenses of $88,584 and $89,720 for the years ended December 31, 2017 and 2016, respectively.
The land use right for land located in Huizhou was pledged as collateral for bank loans as of December 31, 2017 and 2016, respectively.
The land use right for land located in Ganzhou City was pledged as collateral for bank loans as of December 31, 2016.
F- 20 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
11. | Other assets |
December 31, | December 31, | |||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Consumer battery license fee (1) | 450,000 | 500,000 | ||||||
Long-term rental deposit | 298,431 | - | ||||||
748,431 | 500,000 |
(1) The Company is amortizing the $1,000,000 cost of the Consumer Battery License Agreement with a License Provider over a period of 20 years on the straight line basis in accordance with the terms of license (See Note 13).
Amortization expenses included in research and development expense were $50,000 for both the years ended December 31, 2017 and 2016.
12. | Long-term investments |
Investment to Yipeng
In 2016, the Company invested an aggregate amount of RMB65.0 million (approximately $10.0 million) in exchange for 35.4% of the equity interest of Yipeng, which was recorded under the equity method as of December 31, 2016.
On May 5, 2017, the Company entered into an Agreement for Equity Transfer and Capital Increase (the “Equity Transfer Agreement”) with a third party, Xiamen Jiupai Yuanjiang New Power Equity Investment Partnership ("New Power"). New Power invested RMB60.0 million (approximately $9.2 million) for a 20% equity interest in Yipeng, which the business registration was completed on June 8, 2017, and the Company received RMB71.0 million (approximately $10.9 million) in cash from New Power for the sales of 25,145,834 shares in Yipeng on July 27, 2017 (collectively, the “Equity Transfer Transaction”). After the Equity Transfer Transaction, the Company’s equity ownership in Yipeng decreased from 35.4% to 4.654%, and the Company lost the ability to exercise significant influence over Yipeng, discontinued the use of equity method accounting and applied the cost method.
The Company recognized gain on dilution in equity method investee of $500,270 for the year ended December 31, 2017 in connection with the additional equity issuance of Yipeng to New Power. The Company recognized gain on sales for $1,677,367 in connection with the sales of its shares in Yipeng to New Power.
The equity in earnings of investee was $107,243 and $351,755 from January 1, 2017 to July 27, 2017 and from May 12, 2016 to December 31, 2016, respectively.
Deconsolidation of GZ Highpower
On December 11, 2017, GZ Highpower signed the Agreement with Xiamen Tungsten and Mr. Ou, the General Manager of GZ Highpower. Pursuant to the terms of the Agreement, GZ Highpower will receive a total of RMB92.8 million (approximately $14.3 million), including RMB78.9 million (approximately $12.1 million) from Xiamen Tungsten in exchange for 55.294% ownership of GZ Highpower. The Transaction was completed on December 21, 2017 upon the receipt of the payments by GZ Highpower. After the Transaction, the Company lost the controlling power over GZ Highpower and deconsolidated GZ Highpower. As of December 31, 2017, the Company held 31.294% of the equity interest of GZ Highpower which was recorded under the equity method.
In connection with the Transaction, RMB 40 million (approximately $6.1 million) of the proceeds was received by the Company in the form of repayments of loans and related interests that were previously extended by the Company to GZ Highpower.
During the year ended December 31, 2017, the Company recognized gain amounting to $6,004,008 arising from deconsolidation of GZ Highpower which was completed on December 21, 2017.
F- 21 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
13. | Other payables and accrued liabilities |
December 31, | December 31, | |||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Accrued expenses | 1,140,443 | 1,011,866 | ||||||
Accrued payroll | 7,442,056 | 6,094,843 | ||||||
Royalty payable | 427,986 | 400,773 | ||||||
VAT payable | 94,612 | 554,064 | ||||||
Sales deposits received | 1,759,021 | 1,582,141 | ||||||
Other payables | 1,379,227 | 1,504,869 | ||||||
12,243,345 | 11,148,556 |
14. | Taxation |
Highpower and its direct and indirect wholly owned 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
Tax Reform
On December 22, 2017, the Tax Act was signed into legislation. The 2017 Tax Act significantly revises the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 34% to 21%, imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax.
On December 22, 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740, Income Taxes. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.
As of December 31, 2017, the Company has not completed its accounting for certain tax effects of enactment of the Tax Act; however, as described below, the Company has made reasonable estimates of the effects on our existing deferred tax balances and the one-time transition tax. The Company expects to finalize these provisional estimates before the end of 2018 after completing our reviews and analysis, including reviews and analysis of any interpretations issued during this re-measurement period.
F- 22 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
14. | Taxation (continued) |
United States (continued)
The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid.
The one-time transition tax is based on the total post-1986 earnings and profits (“E&P”) for which the Company has previously deferred U.S. income taxes. The Company recognized a one-time transition tax of $0.8 million on previously deferred foreign earnings of $17.0 million. The Company expects to make adjustments to this provisional estimate based on additional clarifying and interpretative technical guidance to be issued related to the calculation of the one-time transition tax.
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. 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 PRC subsidiaries received NHTE status and enjoy 15% income tax rate for calendar year 2017 and 2016.
The components of the provision for income taxes expenses are:
For the years ended
December 31, |
||||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Current |
3,940,699 |
1,471,933 | ||||||
Deferred | 374,626 | (32,756 | ) | |||||
Total income taxes expenses |
4,315,325 |
1,439,177 |
F- 23 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
14. | Taxation (continued) |
The reconciliation of income taxes expenses computed at the PRC statutory tax rate applicable to income tax expense is as follows:
For the years ended December 31, | ||||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Income before tax | 21,529,221 | 7,066,954 | ||||||
Provision for income taxes at PRC statutory income tax rate (25%) | 5,382,305 | 1,766,739 | ||||||
Impact of different tax rates in other jurisdictions | (75,504 | ) | 100,139 | |||||
Effect of PRC preferential tax rate | (2,313,343 | ) | (959,453 | ) | ||||
R&D expenses eligible for super deduction | (451,003 | ) | (546,088 | ) | ||||
Other non-deductible expenses | 754,820 | 146,493 | ||||||
Toll-charge from the Tax Act | 5,773,436 | - | ||||||
Foreign tax credits | (2,063,810 | ) | - | |||||
Change in valuation allowance of deferred tax assets | (2,691,576 | ) | 931,347 | |||||
Effective enterprise income tax | 4,315,325 | 1,439,177 |
3) Deferred tax assets, net
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, | |||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Tax loss carry-forward | 991,766 | 4,274,881 | ||||||
Allowance for doubtful receivables | 136,562 | 121,932 | ||||||
Impairment for inventory | 222,289 | 98,276 | ||||||
Difference for sales cut-off | 17,322 | 14,245 | ||||||
Deferred income | 46,446 | 114,224 | ||||||
Property, plant and equipment subsidized by government grant | 269,344 | 468,313 | ||||||
Impairment for property, plant and equipment | 58,304 | 76,248 | ||||||
Total gross deferred tax assets | 1,742,033 | 5,168,119 | ||||||
Valuation allowance | (991,766 | ) | (3,690,358 | ) | ||||
Total net deferred tax assets | 750,267 | 1,477,761 |
As of December 31, 2017, the Company had net operating loss carry-forwards in Hong Kong of $6,010,701 and all of these losses do not expire.
Valuation allowance was provided against deferred tax assets in entities where it was determined, it was more likely than not that the benefits of the deferred tax assets will not be realized. The Company had deferred tax assets which consisted of tax loss carry-forwards and others, which can be carried forward to offset future taxable income. The management determines it is more likely than not that part of deferred tax assets could not be utilized, so allowance was provided as of December 31, 2017 and 2016. The net valuation allowance decreased by approximately $2.7 million and increased by approximately $0.9 million during the years ended December 31, 2017 and 2016, respectively.
F- 24 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
15. | Notes payable |
Notes payable are presented to certain suppliers as a payment against the outstanding trade payables.
Notes payable are mainly bank acceptable bills which are non-interest bearing and generally mature within six months. The outstanding bank acceptance bills are secured by restricted cash deposited in banks. Outstanding bank acceptance bills were $54,859,478 and $30,658,000 as of December 31, 2017 and 2016, respectively.
16. | Short-term loans |
As of December 31, 2017, the bank borrowings were for working capital and capital expenditure purposes and were secured by personal guarantees executed by the Company’s Chief Executive Officer, Mr. Dang Yu Pan and his wife of the Company, the time deposit with a carrying amount of $ 3,982,226, the land use right with a net carrying amount of $2,639,631 and the buildings with a net carrying amount of $9,621,537, respectively.
The loans as of December 31, 2017 were primarily obtained from two banks with interest rates ranging from 5.000% to 5.8725% per annum. The interest expenses were $909,878 and $925,115 for the years ended December 31, 2017 and 2016, respectively.
The weighted average interest rates of short-term loans outstanding were 4.34% and 5.18% per annum as of December 31, 2017 and 2016, respectively.
17. | Non-financial institution borrowings |
In 2016, the Company obtained $3,005,666 borrowings from a third party non-financial institution and $1,502,833 from an individual, which were used for working capital and capital expenditure purposes. The interest rates for the borrowings were 5.66%. The borrowings are personally guaranteed by the Company’s Chief Executive Officer, Mr. Dang Yu Pan. For the year ended December 31, 2016, the Company paid $601,133 back to the third party non-financial institution.
In 2017, the Company obtained borrowings from a third party non-financial institution in amount of $1,483,812 and an individual in an amount of $8,902,870, which were used for working capital and capital expenditure purposes. The interest rates for the borrowings were 5.655% and 5.66% per annum, respectively. The borrowings are personally guaranteed by the Company's Chief Executive Officer, Mr. Dang Yu Pan. For the year ended December 31, 2017, the Company paid back $2,374,099 to the third party non-financial institution and $1,483,811 to the individual, respectively.
The interest expenses of the above borrowings were $622,694 and $157,740 for the years ended December 31, 2017 and 2016, respectively.
F- 25 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
18. | Lines of credit |
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, 2017 and 2016:
December 31, 2017 | ||||||||||||
Lender | Starting date | Maturity date |
Maximum
Amount Available of Line of Credit |
Unused line of
credit |
||||||||
$ | $ | |||||||||||
Ping An Bank Co., Ltd. (1) | 3/17/2017 | 3/16/2018 | 10,756,158 | 3,130,042 | ||||||||
Industrial and Commercial Bank of China (1) | 8/24/2017 | 8/31/2018 | 7,682,970 | 6,146,376 | ||||||||
Jiang Su Bank Co., Ltd. (1) | 4/20/2017 | 4/19/2018 | 3,841,485 | 113,708 | ||||||||
Jiang Su Bank Co., Ltd. (2) | 7/3/2017 | 7/2/2018 | 2,560,990 | 7,171 | ||||||||
Industrial Bank Co., Ltd. (1) | 9/20/2017 | 9/20/2018 | 3,073,188 | 517,832 | ||||||||
Guangdong Huaxing Bank (1) | 10/26/2017 | 9/27/2018 | 9,219,564 | 3,543,386 | ||||||||
Hua Xia Bank Co., Ltd. (2) | 10/23/2017 | 10/23/2018 | 7,682,970 | 4,745,002 | ||||||||
China Minsheng Banking Corp., Ltd. (1) | 11/14/2017 | 11/14/2018 | 5,121,980 | 1,280,495 | ||||||||
Bank of China (1) | 7/11/2016 | 7/11/2019 | 13,445,197 | 8,279,168 | ||||||||
Bank of China (1) | 7/12/2016 | 7/12/2019 | 12,292,752 | 3,366,677 | ||||||||
Bank of China (1) | 7/25/2016 | 7/25/2019 | 4,097,584 | 143,928 | ||||||||
Total | 79,774,838 | 31,273,785 |
December 31, 2016 | ||||||||||||
Lender | Starting date | Maturity date |
Maximum
Amount Available of Line of Credit |
Unused line of
credit |
||||||||
$ | $ | |||||||||||
Bank of China (1) | 7/11/2016 | 7/11/2019 | 12,590,290 | 1,444,934 | ||||||||
China Everbright Bank Co., Ltd. (1) | 12/28/2016 | 12/27/2017 | 7,194,452 | 7,194,452 | ||||||||
Industrial and Commercial Bank of China (1) | 7/1/2016 | 6/30/2017 | 7,194,452 | 4,316,671 | ||||||||
China Minsheng Banking Corp., Ltd. (1) | 11/1/2016 | 11/1/2017 | 3,597,226 | 287,778 | ||||||||
Bank of China (1) | 7/12/2016 | 7/12/2019 | 10,483,344 | 111 | ||||||||
Industrial Bank Co., Ltd. (1) | 10/28/2016 | 10/28/2017 | 7,194,452 | 2,409,882 | ||||||||
Hua Xia Bank Co., Ltd. (2) | 6/1/2016 | 6/1/2017 | 4,316,671 | 2,298,681 | ||||||||
Bank of China (1) | 7/25/2016 | 7/25/2019 | 3,837,041 | 124,892 | ||||||||
Hongkong and Shanghai Banking Corporation Limited (1) | 8/26/2016 | 7/15/2017 | 4,000,000 | 4,000,000 | ||||||||
Total | 60,407,928 | 22,077,401 |
(1) | The lines of credits are guaranteed by the Company’s Chief Executive Officer, Mr. Dang Yu Pan. |
(2) | The lines of credit are guaranteed by the Company’s Chief Executive Officer, Mr. Dang Yu Pan, and his wife. |
Certain of the agreements governing the Company’s loans include standard affirmative and negative as well as financial 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; that the borrower’s asset-liability ratio need be lower than 75%; 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.
F- 26 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
19. | Share-based compensation |
Under the Company’s 2008 Omnibus Incentive Plan (the "2008 Plan") a total of two million shares were reserved for issuance. In October 2017, the Company ceased granting awards under the 2008 Plan and there were 47,046 remaining shares available for grant under the 2008 Plan. Under the terms of the 2008 Plan, options were granted with a contractual term of 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 stock appreciation rights (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.
A total of 2,250,000 shares were reserved for issuance under the 2017 Omnibus Incentive Plan (the “2017 Plan”), which was adopted on October 3, 2017. As of December 31, 2017, 2,250,000 shares were available for future grant under the 2017 Plan. The 2017 Plan authorizes the issuance of awards including stock options, restricted stock units (RSUs), restricted stock, unrestricted stock, 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 2017 Plan, including the number of shares, vesting conditions and the required service or performance criteria. Under the terms of the 2017 Plan, in general, options and SAR’s will vest over a three to five-year period with an exercise price not less than the fair market value on the date of grant. However, options may vest based on time or achievement of performance conditions. Options may contain early exercise provisions, to which the Company will have the right to repurchase any unvested shares in the event that the awardee is terminated. 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. The maximum term of options granted under the 2017 Plan is ten years, except that the maximum permitted term of incentive stock options granted to 10% stockholders is five years.
A summary of the option activity as of December 31, 2017 and 2016 and changes during the fiscal years then ended is presented below:
Options Granted to Employees
Number of
Shares |
Weighted
Average Exercise Price |
Remaining
Contractual Term in Years |
||||||||||
$ | ||||||||||||
Outstanding, January 1, 2016 | 786,926 | 3.08 | 6.90 | |||||||||
Granted | 190,000 | 2.66 | - | |||||||||
Exercised | (13,312 | ) | 2.63 | - | ||||||||
Forfeited | (41,678 | ) | 2.15 | - | ||||||||
Canceled | (366,544 | ) | 3.47 | - | ||||||||
Outstanding, December 31, 2016 | 555,392 | 2.70 | 7.39 | |||||||||
Exercisable, December 31, 2016 | 381,392 | 2.76 | 6.67 |
F- 27 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
19. | Share-based compensation (continued) |
Options Granted to Employees (continued)
Number of
Shares |
Weighted
Average Exercise Price |
Remaining
Contractual Term in Years |
||||||||||
$ | ||||||||||||
Outstanding, January 1, 2017 | 555,392 | 2.70 | 7.39 | |||||||||
Granted | 665,000 | 4.59 | - | |||||||||
Exercised | (294,667 | ) | 3.26 | - | ||||||||
Forfeited | (3,619 | ) | 2.63 | - | ||||||||
Canceled | (7,064 | ) | 2.63 | - | ||||||||
Outstanding, December 31, 2017 | 915,042 | 4.07 | 8.34 | |||||||||
Exercisable, December 31, 2017 | 130,042 | 2.80 | 5.74 |
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. The aggregate intrinsic value of options exercisable, and vested and expected to vest as of December 31, 2017, was approximately $133,000 and $298,000, respectively. The aggregate intrinsic value of options exercisable, and vested and expected to vest as of December 31, 2016 was approximately $8,000 and $8,000, respectively.
During the years ended December 31, 2017, the Company granted options to purchase 665,000 shares to twenty-three employees at a weighted average grant date fair value of $3.10 per share. Thirty-six employees exercised their options to purchase 294,667 shares of the Company’s common stock. Three employees resigned and their options to purchase a total of 3,619 shares of the Company’s common stock were forfeited. These employees had resigned with 17,100 shares vested, which if not exercised with 90 days after termination, will be cancelled. Of these vested shares 10,036 shares were exercised and 7,064 shares were cancelled during the year ended December 31, 2017, and no outstanding and exercisable share as of December 31, 2017.
During the year ended December 31, 2016, the Company granted options to purchase 190,000 shares to two employees at a weighted average grant date fair value of $2.66 per share. Four employees exercised their option to purchase 13,312 shares of the Company’s common stock. Thirteen employees resigned and their options to purchase a total of 41,678 shares of the Company’s common stock were forfeited. These employees had resigned with 386,920 shares vested, which if not exercised with 90 days after termination, will be cancelled. Of these vested shares 13,312 shares were exercised and 366,544 shares were cancelled during the year ended December 31, 2016, and 7,064 were outstanding and exercisable as of December 31, 2016.
F- 28 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
19. | Share-based compensation (continued) |
Restricted stock awards
During the year ended December 31, 2017, the Company granted 115,000 shares of restricted stock to one employee and five members of the Board of Directors. The Restricted Stock Awards (“RSAs”) granted in 2017 vest over a three year period on the anniversary date of the grant at 30%, 30% and 40%, respectively, with the entire 30% vesting on the first anniversary of the grant, and thereafter on each subsequent anniversary date of the grant, the awards vest in equal installments on a 1/12th basis each month per year for the applicable percentage. RSAs granted under the incentive plans are governed by agreements between the Company and recipients of the awards. In December 2017, one member of the Board of Directors resigned, and 15,000 shares of unvested restricted stock were cancelled.
A summary of the RSA activity as of December 31, 2017 and changes during the fiscal year then ended is presented below:
Number of
Shares |
Weighted
Average Exercise Price |
|||||||
$ | ||||||||
Outstanding, January 1, 2017 | - | - | ||||||
Granted | 115,000 | 4.65 | ||||||
Cancelled | (15,000 | ) | 4.65 | |||||
Outstanding, December 31, 2017 | 100,000 | 4.65 |
Total Share-based Compensation Expense
The estimated fair value of share-based compensation for 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. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model under the following assumptions:
For the years ended December 31, | ||||||||
2017 | 2016 | |||||||
Dividend yield | - | - | ||||||
Risk-free interest rate | 2%-2.06% | 1.21%-1.4% | ||||||
Expected term (in years) | 6-6.05 | 5-6.05 | ||||||
Volatility | 76.16%-76.74% | 76.98%-79.55% | ||||||
Forfeiture rates | 4 | % | 9 | % |
As of December 31, 2017, total unrecognized compensation cost related to unvested share-based compensation awards was $2,416,032. This amount is expected to be recognized as stock-based compensation expense in the Company’s consolidated statements of operations and comprehensive income over the remaining weighted average vesting period of 2.66 years.
In connection with the grant of stock options and RSAs to employees, the Company recorded stock-based compensation charges of $326,171 and $317,946, for the years ended December 31, 2017 and 2016, respectively. No options were granted to non-employees during the years ended December 31, 2017 and 2016.
The Company has adopted ASU 2016-09 "Improvement to employee Share-Based Payment Accounting" in Q1-2017 and has elected to account forfeitures as they occur. The cumulative effect on the retained earnings is $3,689.
F- 29 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
20. | Earnings per share |
The following table sets forth the computation of basic and diluted earnings per common share for the years ended December 31, 2017 and 2016.
For the years ended December 31, | ||||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Numerator: | ||||||||
Net income attributable to the Company | 16,772,852 | 6,117,927 | ||||||
Denominator: | ||||||||
Weighted-average shares outstanding | ||||||||
- Basic | 15,326,797 | 15,105,235 | ||||||
- Dilutive effects of equity incentive awards | 108,574 | 8,679 | ||||||
- Diluted | 15,435,371 | 15,113,914 | ||||||
Net income per share: | ||||||||
- Basic | 1.09 | 0.41 | ||||||
- Diluted | 1.09 | 0.40 |
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.
915,042 shares of outstanding stock options with a total dilutive effect of 54,325 shares were included in the computation of diluted EPS for the year ended December 31, 2017. There were 200,000 warrants with a total dilutive effect of 53,846 shares were included in the computation of diluted EPS for the year ended December 31, 2017. There were 7,064 forfeited options with a total dilutive effect of 403 shares were included in the computation of diluted EPS for the year ended December 31, 2017.
555,392 shares of outstanding stock options with a total dilutive effect of 3,435 shares were included in the computation of diluted EPS for the year ended December 31, 2016. There were 740,001 warrants with a total dilutive effect of 5,244 shares were included in the computation of diluted EPS for the year ended December 31, 2016.
F- 30 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
21. | Warrant liability |
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 to purchase 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 warrants had an initial exercise price of $6.33 per share and were exercisable until April 17, 2017.
The warrants were classified as a liability. The fair value of the warrants liability is re-measured at each reporting period. As of December 31, 2017 and 2016 the fair value of warrant liability was $nil and $259, respectively. For the years ended December 31, 2017 and 2016, the Company recognized a gain of $259 and $140,290, respectively, on the changes in the fair value of the warrant liability.
In January 2014, the Company issued to a consultant warrants to purchase 100,000 shares of common stock with an exercise price of $2.20 per share and warrants to purchase 100,000 shares of common stock with an exercise price of $3.80 per share. The warrants expire in January 2019.
The fair value of the warrants as of December 31, 2016 were calculated using the Black-Scholes pricing model with the following assumptions:
Expected volatility | 56.79 | % | ||
Risk-free interest rate | 0.53 | % | ||
Expected term (in years) | 0.30 | |||
Dividend rate | - |
The Company revalued the warrants utilizing a binomial model as of December 31, 2016 with no material difference in the value. The warrants expired on April 17, 2017.
The movement of the warrant for the years ended December 31, 2017 and 2016 is as following:
Warrants |
Weighted
Average Exercise Price |
Remaining
Contractual Term in Years |
||||||||||
$ | ||||||||||||
Outstanding, January 1, 2016 | 500,001 | 6.33 | 1.3 | |||||||||
Granted | - | - | - | |||||||||
Outstanding, December 31, 2016 | 500,001 | 6.33 | 0.3 | |||||||||
Outstanding, January 1, 2017 | 500,001 | 6.33 | 0.3 | |||||||||
Expired | (500,001 | ) | 6.33 | - | ||||||||
Outstanding, December 31, 2017 | - | - | - |
F- 31 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
22. | Non-controlling interest |
As of December 31, 2016, non-controlling interest related to the 30% minority interest in GZ Highpower in the consolidated balance sheet was $329,343. GZ Highpower was deconsolidated on December 21, 2017, Details see Note 12
For the years ended December 31, 2017 and 2016, non-controlling interest related to GZ Highpower in the consolidated statements of operations was gain of $441,044 and loss of $490,150, respectively.
23. | 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 (“the 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 contributions made related to the Benefits, the Company has no legal obligation.
The total contributions made, which were expensed as incurred, were $2,752,901 and $1,614,299 for the years ended December 31, 2017 and 2016, respectively.
24. | 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 2018 to 2022, with an option to renew the lease. All leases are on a fixed payment basis. None of the leases include contingent rentals. Minimum future commitments under these agreements as of December 31, 2017 are as follows:
For the years ending December 31, | $ | |||
2018 | 3,033,333 | |||
2019 | 2,545,351 | |||
2020 | 1,726,499 | |||
2021 | 1,686,532 | |||
2022 | 703,763 | |||
9,695,478 |
Rent expenses for the years ended December 31, 2017 and 2016 were $2,540,031 and $1,858,577, respectively.
F- 32 |
HIGHPOWER INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
25. | Segment information |
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) Lithium Business; (ii) Ni-MH Batteries and Accessories; and (iii) New Materials.
The descriptions of the reportable segments have been changed from Lithium Batteries and Ni-MH Batteries to Lithium Business and Ni-MH Batteries and Accessories, respectively. Lithium Business mainly consists of lithium batteries, power storage system and power source solutions. Ni-MH Batteries and Accessories mainly consists of Ni-MH rechargeable batteries, sized batteries in blister packing as well as chargers and battery packs.
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, | ||||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Net sales | ||||||||
Lithium Business | 161,660,771 | 112,128,757 | ||||||
Ni-MH Batteries and Accessories | 53,492,309 | 57,211,657 | ||||||
New Materials | 29,013,232 | 4,510,699 | ||||||
Total | 244,166,312 | 173,851,113 | ||||||
Cost of Sales | ||||||||
Lithium Business | 129,295,264 | 87,721,456 | ||||||
Ni-MH Batteries and Accessories | 41,834,267 | 43,163,019 | ||||||
New Materials | 25,662,913 | 4,884,167 | ||||||
Total | 196,792,444 | 135,768,642 | ||||||
Gross Profit | ||||||||
Lithium Business | 32,365,507 | 24,407,301 | ||||||
Ni-MH Batteries and Accessories | 11,658,042 | 14,048,638 | ||||||
New Materials | 3,350,319 | (373,468 | ) | |||||
Total | 47,373,868 | 38,082,471 |
December 31,
2017 |
December 31,
2016 |
|||||||
$ | $ | |||||||
Total Assets | ||||||||
Lithium Business |
171,881,450 |
115,116,508 | ||||||
Ni-MH Batteries and Accessories |
48,383,088 |
37,994,369 | ||||||
New Materials | - | 10,220,873 | ||||||
Total | 220,264,538 | 163,331,750 |
F- 33 |
HIGHPOWERINTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
25. | Segment information (continued) |
All long-lived assets of the Company are located in the PRC. Geographic information about the sales and accounts receivable based on the locations of the Company’s customers is set out as follows:
December 31, | December 31, | |||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Accounts receivable | ||||||||
China mainland | 37,636,478 | 29,663,633 | ||||||
Asia, others | 15,294,527 | 10,441,358 | ||||||
Europe | 5,189,859 | 3,875,979 | ||||||
North America | 94,585 | 2,260,840 | ||||||
South America | 12,816 | 26,610 | ||||||
Africa | - | 378 | ||||||
Others | 24,734 | 11,971 | ||||||
58,252,999 | 46,280,769 |
F- 34 |
HIGHPOWERINTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016
(Stated in US Dollars)
26. | Related party balance and transaction |
Related party balances
December 31, | December 31, | |||||||
2017 | 2016 | |||||||
$ | $ | |||||||
Accounts receivable | 632,704 | 7,125,140 | ||||||
Other receivable | 533,134 | 392,110 | ||||||
Account due from related parties | 1,165,838 | 7,517,250 | ||||||
Accounts payable | - | 1,516,557 | ||||||
Other payables | - | 5,756 | ||||||
Amount due to a related party | - | 1,522,313 |
Prior to July 27, 2017, Yipeng was considered as a related party of the Company. From December 21, 2017, GZ Highpower was considered as a related party of the Company (See Note 12).
Related party transactions
Yipeng
The details of the transactions with Yipeng were as follows:
From January 1, 2017 to July
27, 2017 |
From May 2, 2016 to
December 31, 2016 |
|||||||
$ | $ | |||||||
Income: | ||||||||
Sales | 2,188,957 | 9,345,285 | ||||||
Rental income (1) | 26,895 | 38,188 | ||||||
Expenses: | ||||||||
Technical support fee | - | 992,359 | ||||||
Equipment rental fee (2) | 386,341 | 246,143 | ||||||
Sales quantity deposit paid | - | 751,416 | ||||||
Purchase | - | 254 |
(1) The Company signed an agreement with Yipeng for its office leasing and received rental income from Yipeng.
(2) The Company rent machines from Yipeng since September 1, 2016 and the Company accrued rental expense for it.
GZ Highpower
The Company received the repayment, RMB 40 million (approximately $6.1 million) of loans and related interests from GZ Highpower (See Note 12).
27. | Subsequent event |
The Company has evaluated subsequent events through the issuance of the consolidated financial statements and no subsequent event is identified that would have required adjustment or disclosure in the consolidated financial statements.
F- 35 |
Exhibit 10.22
Working Capital Loan Contract
Reference No. : 2016nianzhenzhongyinbujiezi No.0081
Party A: Springpower Technology (Shenzhen) Co., Ltd.
Business Licences:***
Legal Representative: Dangyu Pan
Address: Factory A, Chaoshun Industrial Zone, Renmin Road, Fumin Residential Area, Guanlan, BaoAn District, shenzhen
Postal code: 518000
Deposit A/C and financial institutions: Bank of China, Pinghu Sub-branch, Shenzhen,***
Telephone: 0755-28010758; Facsimile: 0755-28010758
Party B: Bank of China, Buji Sub-branch.
Legal Representative: ZHENG XIAOCHUAN
Address: 108, Buji Road, Buji Town, Longgang District, Shenzhen; Postal code: 518000
Telephone: 0755-22334749; Facsimile: 0755-28850638
Borrowers and lenders through equal consultation, the lender to borrowers liquidity loan agreement and conclude the contract.
This contract is the affiliated specific credit contract under the “Comprehensive Credit Line Contract” (Reference No.: 2016zhenzhongyinebuxiezi No. 0000445), which is signed by Springpower Technology (Shenzhen) Co., Ltd. and Bank of China, Buji Sub-branch.
Clause 1 Amount
Party B agrees to provide the following loan:
Currency in: RMB
Amount: RMB Ten millions only
RMB 10,000,000.00
Clause 2 Period
The period of the loan is 12 months starting from the first withdrawal date in part or in whole. It is Party A’s obligation to withdraw funds on the date as agreed. Any late withdrawal will not result in delay/extension of repayment.
Clause 3 Use of loan
Purpose of loan: Purchase of raw materials
Party A is prohibited from changing the use of loan without Party B’s written approval. The restrictions include but are not limited to changing the use of loan to fixed assets or equity investments, as well as production activities prohibited by the central governments.
Clause 4 lending rate and interest calculations
1.Lending rate is floating rate, which is reset every 12 months starting from the first withdrawal date. The rate resetting date is the first day of each floating period.
For each withdrawal in installments:
■ RMB floating rate
A. First withdrawal (during the first floating period) interest rate is the twelve-month benchmark lending interest rate, set by Interbank rates, plus 135.5;
B. On the interest resetting date, the new interest rate is the spot one-year lending interest rate, benchmarked by Interbank rates, plus 135.5 on all outstanding loan amounts.
2. Interest calculation
Interest is calculated starting from the actual withdrawal date on the actual amount of money withdrawn and the number of days outstanding.
Interest calculation formula: Interest = Principal × actual number of days × daily rate.
Daily rate calculation is: daily rate = APR / 360.
3. The method of interest settlement
Interest settlement takes place on the 20th of each month, the 21st is the interest payment date.
If the final loan principal payment date is different from the interest payment date, the borrower should pay off all interest on the principal payment date.
4. Penalty interest
(1) For the loan overdue or violated use the loan purpose, penalty interest rate will apply to the loan amount that is overdue or misappropriated from the date of overdue or misappropriation until the principal and interest are paid off.
On both overdue and misappropriation of loans, a higher penalty interest rate shall be charged.
(2) If the borrower does not pay interest and/or penalty interest by the interest payment date, the interest is calculated based on Clause 3 and 4.
(3) Penalty rate
■ The penalty interest rate on floating-rate loans
According to the floating period and the method of floating as agreed in Clause 1, the penalty interest rate of the overdue loan shall be the agreed interest rate plus 50%, and the penalty interest rate of the misappropriated loan shall be the agreed interest rate plus 100%;
Clause 5 Withdrawal Conditions
Withdrawal must meet the following conditions:
1. This contract and its attachments have become effective.
2. Party A has provided guarantees requested by Party B, and the guarantee contract has become effective and has accomplished legal procedures of approval and registration.
3. Party A has provided Party B with loan documents, seals, personnel list, specimen signature, and complete the relevant evidence.
4. Party A has opened the account for fulfilling this contract requested by Party B.
5. Party A should submit written withdrawal application, documentary proof for using of loans and complete the relevant formalities for withdrawal before 5 banking days.
6. Party A has submitted resolution books and power of attorney signed by the board or other authorities to Party B.
Withdrawal can be refused by Party B if Party A has not met the above conditions, but agreed by Party B.
Clause 6 Date and method of withdrawal
1. All loans should be withdrawn in 30 days from 24 th Oct 2017.
2. Party B has the right to refuse the withdrawal application of unused loan which is over the date of withdrawal.
Clause 7 Payment of the loan
1. The account
The loan should be granted and paid through the account opened by Party A:
Account Name: Springpower Technology (Shenzhen) Co., Ltd.
Account number: xxxxx
2. The way of payment
(1) The way of payment should be in accordance with laws and regulations, regulatory requirements and the contract. The way of single payment of the Loan should be approved in written withdrawal application. Party B has the right to change the way of payment or stop providing the loan if the way of payment in the application doesn’t meet the requirement.
(3) Borrower makes the payment on its own.
(4) The change of payment. The way of payment should be changed when the payment, credit rating or other conditions of Party A has changed after submitting withdrawal application. Party A should provide the written change application, should resubmit the withdrawal application and documentary proof for using of loans if the sum, payment object or the use of loans has changed.
3. The specific requirements of entrusted payment
(1) Entrusted payment. Party B pay to the specified account directly which is written in this contract, including the name of account, account number and the sum of payment.
(2) To provide the transaction information. Party A should provide the account of loans, the account information of counterparty and relevant documents when entrusted payment. All document provided to Party B should be true, integral and effective, or Party B does not assume any responsibility for failed transaction, and occurred repayment obligations do not be affected.
(3) Party B’s obligations under the entrusted payment
A. Party B pay to the specified account after examination and approval of Party A’s commission books and other related transaction information when entrusted payment.
B. If Party B found that the proof materials and other related trading purposes material provided by Party A does not comply with this contract or the presence of other defects, Party B has the right to require Party A to supplement, replace, description or re-submit the relevant materials. Before these materials are submitted, Party B has the right to refuse the issuance and payment of the relevant amounts.
C. Party B will assume no responsibility and the generated obligations of Party A will be not affected if Party B cannot pay the loan to the counterparty in time in accordance with payment order of Party A because of the refund by opening bank of the counterparty. Party A hereby authorizes Party B to freeze the fund returned by opening bank of the counterparty. In this case, Party A shall resubmit the payment order and use proven materials and other related transaction materials.
(4) Party A shall not piecemeal way to circumvent the trustee to pay Party B.
5. Party B has right to redefine the terms of payment and loan disbursement or stop the loan if the following situations occurred:
(1) Party A violates the contract to circumvent entrusted payment of Party B by piecemeal way.
(2) Party A's credit status drops or main business profitability is not good.
(3) The use of loan is abnormal.
(4) Party A fails to provide the records and information of the loan requested by Party B timely.
(5) Party A contravenes this section to use the loan.
Clause 8 Repayment
1. Party A shall specify the following account as capital recovery account and provide the information of this account. Party B has the right to ask Party A to explain inflows and outflows of large-sum and abnormal capital, as well as monitor capital recovery account.
Account Name: Springpower Technology (Shenzhen) Co., Ltd.
Account number: xxxxx
2. Except otherwise agreed, on the expiry date, Party A must repay all the loans under this contract.
If Party A wants to change the plan of repayment, a written application confirmed in writing by both parties jointly should be submitted in 10 banking days before the loans maturity.
3. Unless otherwise agreed, Party A has the right to decide repayment order of the principal or interest. If there are several expiring loans or overdue loans which are repaid in installment way under this contract, Party B has the right to decide the liquidation sequence of a repayment. Party B has the right to decide the priority of the repayment order if multiple contracts expire at the same time.
4. Unless otherwise agreed, Party A can repay in advance, but Party A should notice Party B in written 15 banking days advance. The amount of the first advance payment used to repay the final maturity of the loan, in reverse order to repay the loans.
5. Party A must deposit funds in the following account three banking days advance of every expiring principle with interest. Party B has the right to take the funds from the account on the expiry date.
Account Name: Springpower Technology (Shenzhen) Co., Ltd.
Account number: xxxxx
Clause 9 Guarantee
1. To ensure that borrowing under this agreement is repaid, the following guarantees shall be adopted:
This contract is the main contract of Guaranty Contract of Maximum Amount (NO: 2016ZHENZHONGYINBUBAOEZI00445A) signed by SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD. (Guarantor) and Party B. Guarantor provides the maximum amount guarantee.
This contract is the main contract of Guaranty Contract of Maximum Amount (NO: 2016ZHENZHONGYINBUBAOEZI00445B) signed by HUIZHOU HIGHPOWER TECHNOLOGY CO., LTD. (Guarantor) and Party B. Guarantor provides the maximum amount guarantee.
This contract is the main contract of Guaranty Contract of Maximum Amount (NO: 2016ZHENZHONGYINBUBAOEZI00445C) signed by DAGNYU PAN (Guarantor) And Party B. Guarantor provides the maximum amount guarantee.
2. Under certain circumstance, Party B believes that will affect the capacity for fulfilling the contract of Party A or Guarantor, or Guarantee Contracts are invalid, revoked or dissolved, or the financial position of Party A/Guarantor deteriorate or Party A/Guarantor involved in litigation issues, or other factors which might affect its repayment ability, or guarantors were found default in other contracts with Party B, or devaluation, dismiss or damage of collaterals which might cause the value of the collaterals slaked or losses, Party B reserves the right to request Party A and Party A has the obligation to add or replace the guarantor.
Clause 10 Statement and Commitment
1. Party A’s statement:
1) Party A is legally register and exist with full capacity for civil rights and civil conduct;
2) Signing and performing the contract is the true will of Party A, Party A has been granted all legal and valid authorizations before signing the contract. The contract does not form a default for other contracts signed and performed by Party A and other legal documents. It is Party A’s responsibility to complete all required approvals, registrations, permits and filings.
3) All document and information, financial statement, certificates and other materials provided by Party A to Party B are true, complete, accurate and effective.
4) All the transactions mentioned by Party A for apply specific credit line should be real and not for illegal purposes such as: money laundry.
5) No hidden events regarding Party A and guarantor’s financial and repayment abilities.
6) Party A and the loan project reach the national environmental standards, not in the list of the enterprises which have problems of energy consumption and pollution, don’t have the risk of energy consumption and pollution.
2. Party A’s commitment:
1) Party A shall submit the financial statements and other relevant information regularly, including but not limited to annual, quarterly and monthly financial reports.
2) Any counter-guarantee agreement between the guarantors and Party A will not affect the Party B’s underlying rights under this contract.
3) Cooperated in Party B’s exam and inspection on the utilization of the loan as well as Party A’s financials and operations.
4) Under circumstances Party A or Guarantor’s capability of performing the contract might be affected, Party A should notify Party B in written in time. Those circumstances included but not limited to merger, division, decrease of capital, equity transfer, investment, a substantial increase of debt financing, a major asset and credit assignment.
Party A should notify Party B in time, when the following things occurred:
A. changes of articles of association, the scope of business, registered capital and legal representative of Party A or Guarantor.
B. Any form of management mode change, including joint operation, invest and cooperate with foreigners, contract management, reorganization, restructuring, listing plan.
C. Party A is involved in major litigation or arbitration, or property or collateral is seized, detained or regulated, or set new guarantee in collateral.
D. Out of business, dissolution, liquidation, suspend business for rectification, cancellation, revocation of the business license or (be) filed for bankruptcy.
E. Shareholders, directors and senior management personnel suspected of serious cases or economic disputes.
F. Default events in other contracts.
G. Operating difficulties and financial situation has deteriorated.
(5) The repayment to Party B prior to shareholders, and is comparable to other creditors of the same kind debts.
Party A is prohibited to repay the loan to shareholders before paying off the principal and interests under the contract.
(6) If Party A fails to pay principal, interests and fees on time in the fiscal year, any form of dividends is forbidden.
(7) Party A cannot dispose of assets to reduce its debt paying ability and promises the total amount of external guarantee is not 1 time higher than its net assets, and the total amount of external guarantee and the amount of single guarantee shall not exceed the limitation set by the articles of association.
(8) Except the use agreed in this contract or agreed by Party B, Party A is prohibited to transfer the loans to other accounts or related accounts.
Party A should provide documentary proof when the loan is transferred to other accounts or related accounts.
(9) Party B has the right to call the loan advanced according to the situation of capital return of Party A.
Clause 11 disclosure of the affiliated transaction inside Party A 's group
Party A is a Group customer confirmed by Party B according to the "Commercial Bank Group guidelines for customer credit risk management business"(hereinafter referred to as “guideline”). During the credit period, Party A shall promptly report to Party B about more than 10% of net assets associated with the transaction, including but not limited to: the parties to the transaction of the association; trading program and nature of the transaction; the amount of the transaction or the corresponding ratio; pricing policies (including no amount or only nominal amounts of transactions).
Under any of the following circumstances, Party B shall have the right to unilaterally decide to suspend the unused loan and recover part or all of the principal and interest of the loan in advance: use the false contracts which are signed with affiliated parties to discount or pledge at bank and to obtain bank funds or credit with notes receivable and accounts receivable without actual trade background; the occurrence of major mergers, acquisitions and reorganization which are considered by Party B may affect the loan safety; evasion or discarding of bank debts on purpose through affiliated transactions; other circumstances stipulated in article eighteenth of "guidelines".
Clause 12 Breach of Covenants
Each of the following events and issues constitute Party A in the event of default under the contract:
1. Party A did not perform the repayment obligation under this contract;
2. Party A has not used the credit funds according to agreed purposes, or has not paid the loan by agreed way in this contract;
3. Party A’s statements in this contract are untrue or in violation with commitments made by Party A in this contract.
4. Under the circumstance defined in 2.(4) of Clause 10, Party A refused to provide additional guarantee or replacement of a new guarantor.
5. Deterioration of credit, or profitability, debt paying ability, operating ability, cash flow and other financial indicators of Party A deteriorate, breaking the contract index constraint agreed or other financial covenants.
6. Party A breaches other contracts signed with Party B or other affiliated institutions of Bank of China.
7. Guarantors breach contracts, or have default events with Party B or other affiliated institutions of Bank of China.
8. The termination of business or dissolution, revocation or bankruptcy of Party A.
9. Party A is or may be involved in major economic disputes, litigation, arbitration, or its assets were seized, detained or enforced, or investigated or punished by the judicial organ or taxation, industry and commerce administrative organs in accordance with the law, has been or may affect its ability to fulfill the obligations under this contract.
10. Abnormal change, missing, legal restriction of personal liberty and investigation by judicial authorities of Party A’s major individual investors, key management personnel, which have been or may affect Party A to fulfill the obligations under this contract.
11. Party B finds the problems which may affect the borrower or guarantor's financial situation and performance capabilities when reviewing Party A’s financial condition and performance capabilities every year (every year from the effective date of the contract);
12. Party A cannot provide materials to Party B to explain large and abnormal capital inflow and outflow in the account.
13. Party A is in violation with other rights and obligations agreed in this contract.
When any of the above situations occurred, Party B will perform the following in separate or all at the same time according to the specific situation:
1) Require Party A or Guarantor to rectify defaults within a definite time.
2) Reduce completely or partly, pause or terminate Party A’s Credit limit.
3) Pause or terminate completely or partly Party A’s business applications in this contract or in other contracts between Party A and Party B specific credit line under this contract. Pause or terminate completely or partly, or cancel or stop offering, paying and settling the unissued loans and unsettled trade financing.
4) Announce the immediate expiration on all or part of the outstanding loans, principle and interest of trade financing and other accounts payable under this contract or other contracts between Party A and Party B.
5) Terminate or release this contract, terminate or release contracts between Party A and Party B completely or partly.
6) Require compensation from Party A on the losses caused by Party A to Party B.
7) Deduct the fund from Party A’s deposit accounts to pay off the debts to Party B under this contract. All the undue funds in the accounts were considered as acceleration of maturity. If the currency in deposit account is different from the currency of Party B’s loans, the exchange rate on the date of the hold in custody will be applied.
8) Real rights of pledge will be executed.
9) Require Guarantors assume liability of guaranty.
10) Other necessary or probable procedures on Party B’s concern.
Clause 13 Rights reserved
One party does not perform part or all of the rights under this contract, nor does not require the other party to perform, undertake part or all of the obligations and responsibilities, which does not mean the abdication of the right or exemption of the obligation and responsibility.
Any tolerance, extension or delay from one party to another party for exercising of rights under this contract does not affect the rights one party enjoys according to this contract and laws and regulations, and does not mean the abdication of the right.
Clause 14 Changes, Modification, Termination
Upon negotiation and agreed by both parties, this contract can be changed and modified by written. Any of the changes and modifications should form the inseparable part of this contract.
Unless otherwise provided for in any law or regulation or stipulated between the parties, this contract would not be terminated prior to all the rights and obligations are fulfilled.
Unless otherwise provided for in any law or regulation or stipulated between the parties, the invalidation of single terms under this contract should not affect the validation of other terms under this contract.
Clause 15 Applicable Law and Resolution for Dispute
1. This contract is applicable to the laws of People’s Republic of China.
During the performance of this contract or in connection with all disputes relating to this contract, the two parties settled through friendly consultations. If negotiation cannot reach agreement, both parties can apply to the local people's court of Party A or other affiliated institutions of Bank of China.
Clause 16 Attachments
The Appendix hereof and the other appendix confirmed by both parties shall form an integral part of this contract, and shall be of legally equal effect with this contract.
1. Withdrawal application;
Clause 17 Other terms and conditions
1. Without Party B’s written approval, Party A is not allowed to transfer the rights and obligations under this contract to the 3rd Parties.
2. Party A should give the consent that Party B might somehow authorize other affiliated institution of Bank of China to perform the obligation. The performing party entitles all the rights and obligations under this contract, the performing party reserves the rights to appeal a resolution of dispute if necessary.
3. The contract has equivalent restrictions to the successors or inherits of both parties.
4. Unless otherwise agreed, the domicile addresses stated in this contract are for corresponding use; both parties should notify each other in writing about any changes of its domicile addresses.
5. The transactions under the contract based on independent interests. According to relevant laws, regulations and regulatory requirements, other parties of the transaction constitutes a connected party or associated persons, any party shall not seek to use this relationship to affect the fair of transaction.
6. The title and name of business in this contract is only for business purposes, will not be used for interpretation of the contract terms, the rights and obligations.
7. In accordance with the provisions of the relevant laws and regulations, supervision, Party B has the right to provide the information of this contract and other relevant information to the credit system of the people's Bank of China and other legally established credit information database, for organizations or individuals who have the appropriate qualifications to query and use.
8. If the drawdown date or the repayment date is in legal holidays, then it is delayed to the first working day after the holidays.
9. If required by the governing institutions, Party B might not be able to perform the obligations agreed in this contract, Party B has the right to stop or change the contract or its clauses, and Party B is exempted from punishment under this circumstance.
Clause 18 Effective of the contract
This contract enters into force upon the date when it is signed or sealed and affixed with official seals by the legal representatives or entrusted agents of Party A and Party B.
This contract is signed in quadruplicate, each party holds two copies, which have the equal legal effect.
/s/ [Stamp of Party A] | |
Signature | |
/s/ [Stamp of Party B] | |
Signature |
Exhibit 10.23
Working Capital Loan Contract
Reference No. : 2017nianzhenzhongyinbujiezi No.0094
Party A: Shenzhen Highpower Technology Co., Ltd
Business License: ***
Legal Representative: Dangyu Pan
Address: Building 1, 68 Xinxia Street, Pinghu, Longgang, Shenzhen;
Postal code: 518000
Deposit A/C and financial institutions: Bank of China, Pinghu Sub-branch, Shenzhen,***
Telephone: 0755-89686236; Facsimile: 0755-89686298
Party B: Bank of China, Buji Sub-branch.
Legal Representative: ZHENG XIAOCHUAN
Address: 108, Buji Road, Buji Town, Longgang District, Shenzhen; Postal code: 518000
Telephone: 0755-22334749; Facsimile: 0755-28850638
Borrowers and lenders through equal consultation, the lender to the borrower liquidity loan agreement and conclude the contract.
This contract is the affiliated specific credit contract under the “Comprehensive Credit Line Contract” (Reference No.: 2016zhenzhongyinebuxiezi No. 0000444), which is signed by Shenzhen Highpower Technology Co., Ltd and Bank of China, Buji Sub-branch.
Clause 1 Amount
Party B agrees to provide the following loan:
Currency in: RMB
Amount: RMB Ten million only
RMB 10,000,000.00
Clause 2 Period
The period of the loan is 12 months starting from the first withdrawal date in part or in whole. It is Party A’s obligation to withdraw funds on the date as agreed. Any late withdrawal will not result in delay/extension of repayment.
Clause 3 Use of loan
Purpose of loan: Purchase of raw materials
Party A is prohibited from changing the use of loan without Party B’s written approval. The restrictions include but are not limited to changing the use of loan to fixed assets or equity investments, as well as production activities prohibited by the central governments.
Clause 4 lending rate and interest calculations
1. Lending rate is floating rate, which is reset every 12 months starting from the first withdrawal date. The rate resetting date is the first day of each floating period.
For each withdrawal in installments:
■ RMB floating rate
A. First withdrawal (during the first floating period) interest rate is the twelve-month benchmark lending interest rate, set by Interbank rates, plus 135.5;
B. On the interest resetting date, the new interest rate is the spot one-year lending interest rate, benchmarked by Interbank rates, plus 135.5 on all outstanding loan amounts.
2. Interest calculation
Interest is calculated starting from the actual withdrawal date on the actual amount of money withdrawn and the number of days outstanding.
Interest calculation formula: Interest = Principal × actual number of days × daily rate.
Daily rate calculation is: daily rate = APR / 360.
3. The method of interest settlement
Interest settlement takes place on the 20th of each month, the 21st is the interest payment date.
If the final loan principal payment date is different from the interest payment date, the borrower should pay off all interest on the principal payment date.
4. Penalty interest
(1) For the loan overdue or violated use the loan purpose, penalty interest rate will apply to the loan amount that is overdue or misappropriated from the date of overdue or misappropriation until the principal and interest are paid off.
On both overdue and misappropriation of loans, a higher penalty interest rate shall be charged.
(2) If the borrower does not pay interest and/or penalty interest by the interest payment date, the interest is calculated based on Clause 3 and 4.
(3) Penalty rate
■ The penalty interest rate on floating-rate loans
According to the floating period and the method of floating as agreed in Clause 1, the penalty interest rate of the overdue loan shall be the agreed interest rate plus 50%, and the penalty interest rate of the misappropriated loan shall be the agreed interest rate plus 100%;
Clause 5 Withdrawal Conditions
Withdrawal must meet the following conditions:
1. This contract and its attachments have become effective.
2. Party A has provided guarantees requested by Party B, and the guarantee contract has become effective and has accomplished legal procedures of approval and registration.
3. Party A has provided Party B with loan documents, seals, personnel list, specimen signature, and complete the relevant evidence.
4. Party A has opened the account for fulfilling this contract requested by Party B.
5. Party A should submit written withdrawal application, documentary proof for using of loans and complete the relevant formalities for withdrawal before 5 banking days.
6. Party A has submitted resolution books and power of attorney signed by the board or other authorities to Party B.
Withdrawal can be refused by Party B if Party A has not met the above conditions, but agreed by Party B.
Clause 6 Date and method of withdrawal
1. All loans should be withdrawn in on 25 th Oct 2017.
2. Party B has the right to refuse the withdrawal application of unused loan which is over the date of withdrawal.
Clause 7 Payment of the loan
1. The account
The loan should be granted and paid through the account opened by Party A:
Account Name: Shenzhen Highpower Technology Co., Ltd.
Account number: 744557938816
2. The way of payment
(1) The way of payment should be in accordance with laws and regulations, regulatory requirements and the contract. The way of single payment of the Loan should be approved in written withdrawal application. Party B has the right to change the way of payment or stop providing the loan if the way of payment in the application doesn’t meet the requirement.
(3) Borrower makes the payment on its own.
(4) The change of payment. The way of payment should be changed when the payment, credit rating or other conditions of Party A has changed after submitting withdrawal application. Party A should provide the written change application, should resubmit the withdrawal application and documentary proof for using of loans if the sum, payment object or the use of loans has changed.
3. The specific requirements of entrusted payment
(1) Entrusted payment. Party B pay to the specified account directly which is written in this contract, including the name of account, account number and the sum of payment.
(2) To provide the transaction information. Party A should provide the account of loans, the account information of counterparty and relevant documents when entrusted payment. All document provided to Party B should be true, integral and effective, or Party B does not assume any responsibility for failed transaction, and occurred repayment obligations do not be affected.
(3) Party B’s obligations under the entrusted payment
A. Party B pay to the specified account after examination and approval of Party A’s commission books and other related transaction information when entrusted payment.
B. If Party B found that the proof materials and other related trading purposes material provided by Party A does not comply with this contract or the presence of other defects, Party B has the right to require Party A to supplement, replace, description or re-submit the relevant materials. Before these materials are submitted, Party B has the right to refuse the issuance and payment of the relevant amounts.
C. Party B will assume no responsibility and the generated obligations of Party A will be not affected if Party B cannot pay the loan to the counterparty in time in accordance with payment order of Party A because of the refund by opening bank of the counterparty. Party A hereby authorizes Party B to freeze the fund returned by opening bank of the counterparty. In this case, Party A shall resubmit the payment order and use proven materials and other related transaction materials.
(4) Party A shall not piecemeal way to circumvent the trustee to pay Party B.
5. Party B has right to redefine the terms of payment and loan disbursement or stop the loan if the following situations occurred:
(1) Party A violates the contract to circumvent entrusted payment of Party B by piecemeal way.
(2) Party A's credit status drops or main business profitability is not good.
(3) The use of loan is abnormal.
(4) Party A fails to provide the records and information of the loan requested by Party B timely.
(5) Party A contravenes this section to use the loan.
Clause 8 Repayment
1. Party A shall specify the following account as capital recovery account and provide the information of this account. Party B has the right to ask Party A to explain inflows and outflows of large-sum and abnormal capital, as well as monitor capital recovery account.
Account Name: Shenzhen Highpower Technology Co., Ltd.
Account number: xxxxx
2. Except otherwise agreed, on the expiry date, Party A must repay all the loans under this contract.
If Party A wants to change the plan of repayment, a written application confirmed in writing by both parties jointly should be submitted in 10 banking days before the loans maturity.
3. Unless otherwise agreed, Party A has the right to decide repayment order of the principal or interest. If there are several expiring loans or overdue loans which are repaid in installment way under this contract, Party B has the right to decide the liquidation sequence of a repayment. Party B has the right to decide the priority of the repayment order if multiple contracts expire at the same time.
4. Unless otherwise agreed, Party A can repay in advance, but Party A should notice Party B in written 15 banking days advance. The amount of the first advance payment used to repay the final maturity of the loan, in reverse order to repay the loans.
5. Party A must deposit funds in the following account three banking days advance of every expiring principle with interest. Party B has the right to take the funds from the account on the expiry date.
Account Name: Shenzhen Highpower Technology Co., Ltd.
Account number: xxxxx
Clause 9 Guarantee
1. To ensure that borrowing under this agreement is repaid, the following guarantees shall be adopted:
1) This contract is the main contract of Guaranty Contract of Maximum Amount (NO: 2016ZHENZHONGYINBUBAOEZI00444A) signed by SPRINGPOWER TECHNOLOGY (SHENZHEN) CO., LTD. (Guarantor) and Party B. Guarantor provides the maximum amount guarantee.
2) This contract is the main contract of Guaranty Contract of Maximum Amount (NO: 2016ZHENZHONGYINBUBAOEZI00444B) signed by DAGNYU PAN (Guarantor) And Party B. Guarantor provides the maximum amount guarantee.
3) This contract is the main contract of Pledge Contract of Maximum Amount (NO: 2016ZHENZHONGYINBUDIEZI0044) signed by SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD. And Party B.
2. Under certain circumstance, Party B believes that will affect the capacity for fulfilling the contract of Party A or Guarantor, or Guarantee Contracts are invalid, revoked or dissolved, or the financial position of Party A/Guarantor deteriorate or Party A/Guarantor involved in litigation issues, or other factors which might affect its repayment ability, or guarantors were found default in other contracts with Party B, or devaluation, dismiss or damage of collaterals which might cause the value of the collaterals slaked or losses, Party B reserves the right to request Party A and Party A has the obligation to add or replace the guarantor.
Clause 10 Statement and Commitment
1. Party A’s statement:
1) Party A is legally register and exist with full capacity for civil rights and civil conduct;
2) Signing and performing the contract is the true will of Party A, Party A has been granted all legal and valid authorizations before signing the contract. The contract does not form a default for other contracts signed and performed by Party A and other legal documents. It is Party A’s responsibility to complete all required approvals, registrations, permits and filings.
3) All document and information, financial statement, certificates and other materials provided by Party A to Party B are true, complete, accurate and effective.
4) All the transactions mentioned by Party A for apply specific credit line should be real and not for illegal purposes such as: money laundry.
5) No hidden events regarding Party A and guarantor’s financial and repayment abilities.
6) Party A and the loan project reach the national environmental standards, not in the list of the enterprises which have problems of energy consumption and pollution, don’t have the risk of energy consumption and pollution.
2. Party A’s commitment:
1) Party A shall submit the financial statements and other relevant information regularly, including but not limited to annual, quarterly and monthly financial reports.
2) Any counter-guarantee agreement between the guarantors and Party A will not affect the Party B’s underlying rights under this contract.
3) Cooperated in Party B’s exam and inspection on the utilization of the loan as well as Party A’s financials and operations.
4) Under circumstances Party A or Guarantor’s capability of performing the contract might be affected, Party A should notify Party B in written in time. Those circumstances included but not limited to merger, division, decrease of capital, equity transfer, investment, a substantial increase of debt financing, a major asset and credit assignment.
Party A should notify Party B in time, when the following things occurred:
A. changes of articles of association, the scope of business, registered capital and legal representative of Party A or Guarantor.
B. Any form of management mode change, including joint operation, invest and cooperate with foreigners, contract management, reorganization, restructuring, listing plan.
C. Party A is involved in major litigation or arbitration, or property or collateral is seized, detained or regulated, or set new guarantee in collateral.
D. Out of business, dissolution, liquidation, suspend business for rectification, cancellation, revocation of the business license or (be) filed for bankruptcy.
E. Shareholders, directors and senior management personnel suspected of serious cases or economic disputes.
F. Default events in other contracts.
G. Operating difficulties and financial situation has deteriorated.
(5) The repayment to Party B prior to shareholders, and is comparable to other creditors of the same kind debts.
Party A is prohibited to repay the loan to shareholders before paying off the principal and interests under the contract.
(6) If Party A fails to pay principal, interests and fees on time in the fiscal year, any form of dividends is forbidden.
(7) Party A cannot dispose of assets to reduce its debt paying ability and promises the total amount of external guarantee is not 1 time higher than its net assets, and the total amount of external guarantee and the amount of single guarantee shall not exceed the limitation set by the articles of association.
(8) Except the use agreed in this contract or agreed by Party B, Party A is prohibited to transfer the loans to other accounts or related accounts.
Party A should provide documentary proof when the loan is transferred to other accounts or related accounts.
(9) Party B has the right to call the loan advanced according to the situation of capital return of Party A.
Clause 11 disclosure of the affiliated transaction inside Party A 's group
Party A is a Group customer confirmed by Party B according to the "Commercial Bank Group guidelines for customer credit risk management business"(hereinafter referred to as “guideline”). During the credit period, Party A shall promptly report to Party B about more than 10% of net assets associated with the transaction, including but not limited to: the parties to the transaction of the association; trading program and nature of the transaction; the amount of the transaction or the corresponding ratio; pricing policies (including no amount or only nominal amounts of transactions).
Under any of the following circumstances, Party B shall have the right to unilaterally decide to suspend the unused loan and recover part or all of the principal and interest of the loan in advance: use the false contracts which are signed with affiliated parties to discount or pledge at bank and to obtain bank funds or credit with notes receivable and accounts receivable without actual trade background; the occurrence of major mergers, acquisitions and reorganization which are considered by Party B may affect the loan safety; evasion or discarding of bank debts on purpose through affiliated transactions; other circumstances stipulated in article eighteenth of "guidelines".
Clause 12 Breach of Covenants
Each of the following events and issues constitute Party A in the event of default under the contract:
1. Party A did not perform the repayment obligation under this contract;
2. Party A has not used the credit funds according to agreed purposes, or has not paid the loan by agreed way in this contract;
3. Party A’s statements in this contract are untrue or in violation with commitments made by Party A in this contract.
4. Under the circumstance defined in 2.(4) of Clause 10, Party A refused to provide additional guarantee or replacement of a new guarantor.
5. Deterioration of credit, or profitability, debt paying ability, operating ability, cash flow and other financial indicators of Party A deteriorate, breaking the contract index constraint agreed or other financial covenants.
6. Party A breaches other contracts signed with Party B or other affiliated institutions of Bank of China.
7. Guarantors breach contracts, or have default events with Party B or other affiliated institutions of Bank of China.
8. The termination of business or dissolution, revocation or bankruptcy of Party A.
9. Party A is or may be involved in major economic disputes, litigation, arbitration, or its assets were seized, detained or enforced, or investigated or punished by the judicial organ or taxation, industry and commerce administrative organs in accordance with the law, has been or may affect its ability to fulfill the obligations under this contract.
10. Abnormal change, missing, legal restriction of personal liberty and investigation by judicial authorities of Party A’s major individual investors, key management personnel, which have been or may affect Party A to fulfill the obligations under this contract.
11. Party B finds the problems which may affect the borrower or guarantor's financial situation and performance capabilities when reviewing Party A’s financial condition and performance capabilities every year (every year from the effective date of the contract);
12. Party A cannot provide materials to Party B to explain large and abnormal capital inflow and outflow in the account.
13. Party A is in violation with other rights and obligations agreed in this contract.
When any of the above situations occurred, Party B will perform the following in separate or all at the same time according to the specific situation:
1) Require Party A or Guarantor to rectify defaults within a definite time.
2) Reduce completely or partly, pause or terminate Party A’s Credit limit.
3) Pause or terminate completely or partly Party A’s business applications in this contract or in other contracts between Party A and Party B specific credit line under this contract. Pause or terminate completely or partly, or cancel or stop offering, paying and settling the unissued loans and unsettled trade financing.
4) Announce the immediate expiration on all or part of the outstanding loans, principle and interest of trade financing and other accounts payable under this contract or other contracts between Party A and Party B.
5) Terminate or release this contract, terminate or release contracts between Party A and Party B completely or partly.
6) Require compensation from Party A on the losses caused by Party A to Party B.
7) Deduct the fund from Party A’s deposit accounts to pay off the debts to Party B under this contract. All the undue funds in the accounts were considered as acceleration of maturity. If the currency in deposit account is different from the currency of Party B’s loans, the exchange rate on the date of the hold in custody will be applied.
8) Real rights of pledge will be executed.
9) Require Guarantors assume liability of guaranty.
10) Other necessary or probable procedures on Party B’s concern.
Clause 13 Rights reserved
One party does not perform part or all of the rights under this contract, nor does not require the other party to perform, undertake part or all of the obligations and responsibilities, which does not mean the abdication of the right or exemption of the obligation and responsibility.
Any tolerance, extension or delay from one party to another party for exercising of rights under this contract does not affect the rights one party enjoys according to this contract and laws and regulations, and does not mean the abdication of the right.
Clause 14 Changes, Modification, Termination
Upon negotiation and agreed by both parties, this contract can be changed and modified by written. Any of the changes and modifications should form the inseparable part of this contract.
Unless otherwise provided for in any law or regulation or stipulated between the parties, this contract would not be terminated prior to all the rights and obligations are fulfilled.
Unless otherwise provided for in any law or regulation or stipulated between the parties, the invalidation of single terms under this contract should not affect the validation of other terms under this contract.
Clause 15 Applicable Law and Resolution for Dispute
1. This contract is applicable to the laws of People’s Republic of China.
During the performance of this contract or in connection with all disputes relating to this contract, the two parties settled through friendly consultations. If negotiation cannot reach agreement, both parties can apply to the local people's court of Party A or other affiliated institutions of Bank of China.
Clause 16 Attachments
The Appendix hereof and the other appendix confirmed by both parties shall form an integral part of this contract, and shall be of legally equal effect with this contract.
1. Withdrawal application;
Clause 17 Other terms and conditions
1. Without Party B’s written approval, Party A is not allowed to transfer the rights and obligations under this contract to the 3rd Parties.
2. Party A should give the consent that Party B might somehow authorize other affiliated institution of Bank of China to perform the obligation. The performing party entitles all the rights and obligations under this contract, the performing party reserves the rights to appeal a resolution of dispute if necessary.
3. The contract has equivalent restrictions to the successors or inherits of both parties.
4. Unless otherwise agreed, the domicile addresses stated in this contract are for corresponding use; both parties should notify each other in writing about any changes of its domicile addresses.
5. The transactions under the contract based on independent interests. According to relevant laws, regulations and regulatory requirements, other parties of the transaction constitutes a connected party or associated persons, any party shall not seek to use this relationship to affect the fair of transaction.
6. The title and name of business in this contract is only for business purposes, will not be used for interpretation of the contract terms, the rights and obligations.
7. In accordance with the provisions of the relevant laws and regulations, supervision, Party B has the right to provide the information of this contract and other relevant information to the credit system of the people's Bank of China and other legally established credit information database, for organizations or individuals who have the appropriate qualifications to query and use.
8. If the drawdown date or the repayment date is in legal holidays, then it is delayed to the first working day after the holidays.
9. If required by the governing institutions, Party B might not be able to perform the obligations agreed in this contract, Party B has the right to stop or change the contract or its clauses, and Party B is exempted from punishment under this circumstance.
Clause 18 Effective of the contract
This contract enters into force upon the date when it is signed or sealed and affixed with official seals by the legal representatives or entrusted agents of Party A and Party B.
This contract is signed in quadruplicate, each party holds two copies, which have the equal legal effect.
/s/ [Stamp of Party A] | |
Signature | |
/s/ [Stamp of Party B] | |
Signature |
Exhibit 10.24
Text Encoding: CMBC-HT031 (GS2007)
Comprehensive Credit Granting Contract
(Applicable to corporate credit granting)
No.: GSXZ 2017 SSBZEZ No. 005
SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD. (Seal)
CHINA MINSHENG BANKING CORP., LTD. SHENZHEN BRANCH (Seal)
CHINA MINSHENG BANKING CORP., LTD.
Comprehensive Credit Granting Contract
Credit Receiver: SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD. ((hereinafter referred to as Party A)
Address: Bldg. 1, No. 68, Xinsha Road, Pinghu Street, Longgang District, Shenzhen
P. C.:
Legal Representative / Main Principal: Pan Dangyu
Tel.:
Fax:
Opening Bank: Minsheng Bank
Account No.: *****
Credit Grantor: CHINA MINSHENG BANKING CORP., LTD. SHENZHEN BRANCH (hereinafter referred to as Party B)
Address:
P. C.: 518048
Legal Representative / Main Principal: Wu Xinjun
Tel.:
Fax:
In accordance with the Contract Law , the Law on Commercial Banks and other relevant laws and regulations, Party A and Party B make and enter into this Contract upon consensus through consultation on the principles of faithfulness, credit, equality and willingness. Both Parties shall commonly observe this Contract.
Chapter 1 Credit Line and Category
Article 1 During the valid credit period specified in this Contract, the highest credit line Party A may apply Party B for use is (in words) twenty million Yuan only, adopting RMB as the currency.
The line under this Contract shall:
¨ be used by Party A;
¨ be used by Party A and its subordinate wholly-owned or holding companies (hereinafter referred to as its subsidiary companies). Refer to annex 1 for the list of subsidiary companies which can use the comprehensive credit line;
Credit line hereunder means the net amount after deducting the deposit. In other words, the equal financing used after Party A or a third party other than Party A pays the deposit (or pledge of deposit) may not occupy the said line.
Article 2 The highest credit line hereunder shall be used for the following credit category:
RMB business: x (1) loan;
þ (2) Acceptance of draft;
x (3) Discount of draft;
þ (4) Letter of guarantee;
x (5) Others:
Trade financing business: x (1) foreign currency loan;
þ (2) Letter of guarantee;
x (3) Outward documentary bill;
x (4) Discount of bill;
x (5) Acceptance of draft;
x (6) Opening of L/C;
x (7) Others:
Other business:
Chapter 2 Credit Term
Article 3 The effective term of the highest credit line specified in Article 1 herein shall be one year , from Nov 14, 2017 to Nov 14, 2018 .
Article 4 Party B is entitled to examine the use of the credit line hereunder at any time. In case of any event of default as specified in Chapter 7 herein, Party B shall have the right to adjust the credit term.
Chapter 3 Guarantee
Article 5 In order to ensure repayment of the creditor’s rights produced herein, the following one or several guarantees are adopted:
x The Mortgagor and Party B (i.e. the Mortgagee) conclude a Maximum Guarantee Contract of No. ;
x The Mortgagor and Party B (i.e. the Mortgagee) conclude a Maximum Guarantee Contract of No. ;
x The Pledgor and Party B (i.e. the Pledgee) conclude a Maximum Guarantee Contract of No. ;
x Party A shall provide maximum guarantee for the credit line used by the subsidiary company listed in the annex.
þ Others: Springpower Technology (Shenzhen) Co., Ltd. and Party B conclude a Maximum Guarantee Contract of 2017 SSBZEZ No. 005-1
the Guarantor Huizhou Highpower Technology Co., Ltd. and Party B conclude a Maximum Guarantee Contract of 2017 SSBZEZ No. 005-2 ;
The Guarantor Pan Dangyu and Party B conclude a Maximum Guarantee Contract of 2017 SSBZEZ No. 005-3;
The Guarantor Pan Dangyu and Party B conclude a Maximum Guarantee Contract of 2017 SSBZEZ No. 005-4;
The Guarantor Pan Dangyu and Party B conclude a Maximum Guarantee Contract of 2017 SSBZEZ No. 005-5;
the Guarantor Shenzhen Highpower Technology Co., Ltd. and Party B conclude a Maximum Guarantee Contract of 2017 SSBZEZ No. 005-6 ;
the Guarantor Shenzhen Highpower Technology Co., Ltd. and Party B conclude a Maximum Guarantee Contract of 2017 SSBZEZ No. 005-7 ;
Article 6 When Party A and Party B concludes a specific business contract hereunder, Party B has the right to demand Party A to provide any security other than that specified in Article 5 herein.
Article 4 Use of Credit Line
Article 7 Within the credit term and highest credit line specified herein, Party A may use the credit line once or several times. If Party B complies with the stipulations of this Contract through review, Party B shall conclude a relevant specific credit granting business contract or agreement with Party A (hereinafter referred to as the specific business contract).
Article 8 The accumulative balance of all the credit lines used by Party A (the accumulative amount of principals used and not repaid) shall not exceed the highest credit line at any time within the credit term. During the credit term, Party A may apply for reusing the credit line that Party A has repaid. The credit line not used during the credit term shall be cancelled automatically when the credit term expires.
If Party A fails to perform its obligations under this Contract or under the specific business contract, Party B shall have the right to stop Party A continuously using the remaining credit line.
Article 9 Party A must use credit lines within the credit term specified in Article 3 herein. The date of use of a credit line shall not be later than the deadline of the credit term (if the business type specified in the specific business contract is loan/import and export bill purchase, the date of release of each loan shall not be later than the deadline; if the business type specified in the Main Contract is acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods), the date of draft of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods) shall not be later than the deadline). In case of adjustment of the credit term, the deadline shall be the deadline after this adjustment. The use term of each credit line shall accord with the specific business contract.
Article 10 When this Contract becomes effective, Party A may not use any line hereunder until it meets the following preconditions simultaneously, or Party B shall have the right to refuse conclusion of a specific business contract with Party A.
10.1 Party A has provided documents according to Party B’s requirements, including but not limited to: Party A’s business license, organization code certificate and tax registration certificate which are qualified through annual inspection; Party A’s current effective articles of association; identity certificate and a photocopy of the OD card of the Company's legal representative;
10.2 Guarantee-related documents as the credit guarantee hereunder are effective, and the mortgage right/pledge right has been established;
10.3 Party A has never conducted any event of default, or Party A has conducted any event of default but the default has been solved satisfying Party B or has been exempted by Party B;
10.4 Party A’s commitments given in Chapter 5 herein have been kept prior to the date of withdrawal;
10.5 Party A’s financial conditions when the credit line is applied for use are basically the same as those when this Contract is signed, and there is no material adverse change;
Article 11 The expenses which should be charged under bills, letter of guarantee, international trade financing and other related business, the discount rate under discount of bills, and the interest rate and exchange rate which should be determined in inward and outward documentary bills shall be agreed by Party A and Party B in each specific business contract.
Article 12 In case of any discrepancy between this Contract and the specific business contract made and entered into by and between Party A and Party B, the specific business contract shall prevail.
Chapter 5 Party A’s Commitments
Article 13 Party A’s use of the credit line shall comply with the provisions of laws and the stipulations of this Contract and the specific business contract, and Party B is entitled to check the situations of the specific business at any time.
Article 14 During the credit use period (from the date of signature of this Contract to the date when Party B’s all creditor’s rights are compensated), Party A shall report true financial statements and all relevant information concerning the opening bank, account number and deposit and loan balances according to Party B’s requirements.
Article 15 If providing security for any other’s debts, Party A shall notify Party B in advance, and the performance of the specific business contract made and entered into with Party B shall not be affected.
Article 16 During the credit use period, Party A shall notify Party B 30 days in advance if Party A conducts activity of asset reorganization by means of merger, acquisition, consolidation and division, or any activity changing its operation right in any form, such as contracting and lease, or any activity changing its organization and operation method, or any activity for selling, transferring or disposing its any material asset or equipment in other forms and making major investment. Party A shall repay Party B’s creditor’s rights in advance or implement the responsibility of repaying creditor’s rights according to Party B’s requirements.
Article 17 In case of any event which endangers Party A’s normal operation or constitutes any major threat to performance of the obligation of repayment hereunder (including but not limited to the events specified in sub-clause 10.3 herein), Party A shall notify Party B immediately in written form.
Article 18 In case of change of the domicile or business site of the legal person of Party A, or increase or decrease of Party A’s registered capital, or change of Party A’s legal representative and other senior management personnel, Party A shall notify Party B within seven days after occurrence of the change.
Article 19 Party A shall repay on time the principal and interests of the funds of the specific business under the credit line and pay on time the expenses payable.
Article 20 If Party A uses international trade financing credit line (including packing loan, import and export bill purchase, opening of L/C, letter of guarantee, discount of bill and acceptance of bill of exchange), Party A shall ensure:
1. the settled amount of the import and export business conducted through Party B during the credit period shall not be less than RMB Yuan, of which the settled amount of the export business shall not be less than RMB Yuan;
2. When the business is conducted, the latest Uniform Customs and Practice for Documentary Credits , the Uniform Rules for Collections and other related international practices prevailing when this Contract is signed shall be strictly observed. Party B’s reputation and interest shall not be damaged due to any business dispute.
Chapter 6 Party B’s Commitments
Article 21 If Party A’s application for use of a credit line complies with the stipulations of this Contract, Party B shall approve and perform the application timely according to the specific business contract signed.
Article 22 Party B shall not make adjustment of the credit term and the highest credit line bad for Party A, unless otherwise specified in Chapter 7 of this Contract.
Chapter 7 Adjustment of Credit Line and Acceleration
Article 23 Under the following circumstances during the performance period of this Contract, Party B is entitled to adjust or cancel a credit line, and demand Party A to prepay all the borrowings having been withdrawn by Party A under this Contract:
23.1 Party A’s operating status is worsen or Party A has any major operational difficulty;
23.2 there is any major change of the market related to Party A’s operation;
23.3 there is any major adjustment of relevant national policies;
23.4 Party A violates any other contract or agreement concluded with others, or Party A makes any commitment or warranty unilaterally, which constitutes breach of other debts or other debts have been or may be announced acceleration by other creditor;
23.5 the guarantee capacity of the guarantor hereunder becomes obviously insufficient, or the guarantor violates the guarantee contract, or the guarantor violates any obligation specified in the commitments given by the guarantor, or the pledged or mortgaged property hereunder is damaged or its value is obviously decreased, and Party A fails to provide a new guarantee required according to Party B’s requirements;
23.6 during the valid period of this Contract, Party A expressly indicates or indicates by acts that Party A is unable to or fails to perform its obligations specified in this Contract, the specific business contract or Party A’s commitments;
23.7 Party A provides Party B with any balance sheet, statement of profits and losses and other important materials which contain false information or conceal important facts, or Party A refuses Party B’s supervision on Party A’s use of the credit line and relevant production, operation and financial activities;
23.8 Party A transfers its assets, withdraws funds, evades debts or has any other behavior which damages Party B’s rights and interest;
23.9 there is any major change of Party A’s financial conditions, or Party A is involved in litigation, arbitration, administrative punishment or other judicial administrative proceedings, which may have adverse impact for Party A on the execution of this Contract;
23.10 there are any other circumstances under which Party A loses or may lose its ability to perform obligations;
23.11 Party A violates its any commitment given in Chapter 5 herein or fails to perform its obligations under this Contract or the specific business contract.
Article 8 Effectiveness of Contract
Article 24 This Contract shall become effective when both Parties’ legal representatives/main principals or authorized agents sign or seal and both Parties affix their official seals/special contract seals.
Chapter 9 Dispute Settlement
Article 25 Any and all disputes between Party A and Party B arising from and in connection with the execution of this Contract and/or the specific business contract shall be governed by the court at the location where Party B is located, except that there are additional stipulations in the specific business contract for governing of disputes under this Contract.
Chapter 10 Supplementary Provisions
Article 26 All the specific business contracts concluded between Party A or its subsidiary companies listed in Annex 1 of this Contract and Party B for each specific credit granting business on the basis of this Contract shall be deemed as an integral part of this Contract and constitute this Contract as a whole.
Article 2 7 The Contract has been made out in two originals for Party A, Party B and the guarantor each holding one , which shall be equally authentic.
Article 28 When this Contract is signed, Party B has explained and interpreted in details all the terms and conditions of this Contract to Party A, and both Parties have no objection to the terms and conditions of this Contract. Both Parties have accurate understanding of the legal meaning of their corresponding rights and obligations, limitation of responsibilities or disclaimers.
Article 29 Other provisions agreed by both Parties
Under this contract amount is only used to party b the upstream enterprise procurement of raw materials and daily business turnover.
The credit category under this Contract includes: bank acceptance bills, with the single deposit ratio not lower than 30% and the maximum term not exceeding 6 months.
Party a can use the maximum amount under this contract is not more than 15 million yuan, Springpower technology ( Shenzhen ) co., ltd. as a quota share, can use the amount under this contract is not more than 10 million yuan, Huizhou Highpower technology co., ltd. as a quota share, can use the amount under this contract is not more than 5 million yuan. When using the quota, party a and Pan Dangyu must provide joint and several liability guarantees for party b 's debts as the quota share.
Article 30 The credit lines granted to Party A and/or its subsidiary companies in accordance with the Comprehensive Credit Granting Contract or any other contract (“Original Credit Granting Contract”) prior to the signature of this Contract may be performed continuously according to the Original Credit Granting Contract and the relevant specific business contract. However, the outstanding credit line under the Original Credit Granting Contract shall be included in the highest credit line specified in Article 1 herein for calculation and management.
Article 31 Both Parties agree and authorize Party B irrevocably to report relevant information to the financial credit information database established by the State. Such information shall include the name, registered address and other related information of this institution, the transaction records, credit information and bad information (including failure to perform obligations of this Contract, the institution’s performance of obligations and enforcement ruled or judged by the people’s court, and other relevant bad information prescribed by laws and regulations) generated during business activities and performance activities of this institution under this Contract.
This Contract is signed by Party A and Party B in Shenzhen .
Party A: SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD. (Seal) (Seal) | |
Legal Representative / Main Principal: Pan Dangyu (Signature) | |
(Or Authorized Agent) | (Signature or Seal) |
Date: | |
Party B: CHINA MINSHENG BANKING CORP., LTD. SHENZHEN BRANCH (Seal) (Seal) | |
Legal Representative / Main Principal: | |
(Or Authorized Agent) | (Signature or Seal) |
Date: |
Annex:
List of subsidiary companies agreed by the Credit Receiver (Party A) for using the lines under the Comprehensive Credit Granting Contract:
1. Full name of the Company: Springpower Technology (Shenzhen) Co., Ltd. |
Address: Workshop Building A, Shunchao Industrial Zone, Renmin Road, Danhu Community, Guanlan Street, Bao’an District, Shenzhen City |
Legal Representative: Pan Dangyu |
P. C.: 518000 Tel.: Fax: |
Opening Bank: Account No.: |
2. Full name of the Company: Huizhou Highpower Technology Co., Ltd. |
Address: Xinhu Industrial Development Zone, Ma’an Town, Huicheng District, Huizhou City |
Legal Representative: Pan Dangyu |
P. C.: Tel.: Fax: |
Opening Bank: Account No.: |
3. Full name of the Company: |
Address: |
Legal Representative: |
P. C.: Tel.: Fax: |
Opening Bank: Account No.: |
4. Full name of the Company: |
Address: |
Legal Representative: |
P. C.: Tel.: Fax: |
Opening Bank: Account No.: |
5. Full name of the Company: |
Address: |
Legal Representative: |
P. C.: Tel.: Fax: |
Opening Bank: Account No.: |
Note: the Credit Receiver shall affix its official seal on this page. Where there is any control of the line for use by a subsidiary company, a limit may be indicated or another page may be made for format explanation.
Exhibit 10.24(a)
Text Encoding: CMBC-HT-699 (XW2015)
Maximum Guarantee Contract
No.: 2017 SSBZEZ No. 005-5
CHINA MINSHENG BANKING CORP., LTD.
Prompt of Party D: the text of this Contract is announced in Party D’s website (www.cmbc.com.cn). All the Parties hereto must carefully read all the terms and conditions of this Contract before signature of this Contract. In case of any unclear information, please consult us immediately and we will answer you actively. When the text of this Contract is signed by all the Parties, all the Parties hereto shall be deemed to have agreed all the terms and conditions of this Contract and have full understanding of the legal meanings of relevant rights, obligations, limitation of liability and disclaimer.
Maximum Guarantee Contract
Guarantor: | Pan Dangyu | (hereinafter referred to as Party A) |
Legal Representative / Principal: ID card No.: ***
Address:
P.C.:
Tel.:
Pledgor: | (hereinafter referred to as Party B) |
Legal Representative / Principal:
Address:
P.C.:
Tel.:
Mortgagor: | (hereinafter referred to as Party C) |
Legal Representative / Principal:
Address:
P.C.:
Tel.:
Secured Party: CHINA MINSHENG BANKING CORP., LTD. SHENZHEN BRANCH (hereinafter referred to as Party D)
Principal: Wu Xinjun
Address:
P. C.: 518048
Tel.:
(If the Guarantor is a natural person, please fill the effective identity certificate name and number after “Legal Representative / Principal”).
In order to ensure the execution of the Main Contract between HUIZHOU HIGHPOWER TECHNOLOGY CO., LTD. (hereinafter referred to as the Debtor under the Main Contract) and Party D, Party A is willing to provided maximum joint guarantee liability for the debts under the Main Contract; Party B is willing to provide maximum pledge guarantee for the debts under the Main Contract to the extent of its properties; and Party C is willing to provide maximum mortgage guarantee for the debts under the Main Contract to the extent of its properties. In accordance with relevant national laws and regulations, the Parties hereto make and enter into this Contract upon consensus through consultation. All the Parties shall commonly abide by this Contract.
Party A, Party B and Party C are hereinafter referred to collectively as the Guarantor.
Part 1
Chapter 1 Guaranteed principal creditor's right
Article 1 Guaranteed principal creditor's right
The principal creditor's right hereunder is as following 1.2 :
1.1 Party D’s all creditor’s rights (including contingent liabilities) under the Comprehensible Credit Granting Contract of 2017 SSBZEZ No. 005 made and entered into by and between the Debtor under the Main Contract and Party D (the contract and the specific business contract produced under the contract commonly constitute the Main Contract of this Contract, hereinafter referred to as the Main Contract). The period of the principal creditor’s rights secured with maximum guarantee is from Nov 14, 2017 to Nov 14, 2018 .
1.2 Party D’s all creditor’s rights (including contingent liabilities) under all the contracts made and entered into by and between Party D and the Debtor under the Main Contract during the period from Nov 14, 2017 to Nov 14, 2018 (period of the principal creditor’s rights) (all these contracts and the specific business contracts under these contracts commonly constitute the Main Contract of this Contract, hereinafter referred to as the Main Contract).
1.3 Party D’s all unpaid creditor’s rights under of No. (the contract and the specific business contract produced under the contract commonly constitute the Main Contract of this Contract, hereinafter referred to as the Main Contract). The period of the principal creditor’s rights secured with maximum guarantee is from to .
1.4 Others:
Article 2 Maximum amount of creditor’s rights
2.1 The maximum amount of creditor’s rights guaranteed by the Guarantor is (in words) five million Yuan only (in figures) ¥ 5,000,000.00) and the currency is RMB . The exchange rate of foreign currencies other than RMB shall be converted according to the rate of foreign exchange issued by Party B when the specific business actually occurs.
2.2 The maximum amount of creditor’s rights is the maximum limit of the balance of unpaid creditor’s rights. Provided that the balance of unpaid creditor’s rights is not higher than the said maximum limit, the Guarantor agrees to undertake guarantee liability for all the accounts payable caused within the guarantee scope specified herein.
Chapter 2 Guarantee
Article 3 Party A is willing to provide guarantee for the debts under the Main Contract according to the following mode:
3.1 Joint liability guarantee.
3.2 Periodic joint liability guarantee, Party A shall bear periodic joint liability guarantee for the principal creditor’s rights of the Debtor under the Main Contract caused during the following period:
3.2.1 From the date of signature of this Contract to the date when the effective housing ownership certificate and housing other rights certificate of the mortgaged real estate under the Main Contract;
3.2.2 From the date of signature of this Contract to ;
3.2.3 Others: .
Chapter 3 Pledge
Article 4 Party B shall provide maximum pledge guarantee for Party D for all the debts under the Main Contract to the extent of the pledged property specified in the following annex . Refer to annex 1 for the pledged property in details.
4.1 List of pledged rights;
4.2 List of pledged movable properties;
4.3 List of pledged fixed deposit account or security deposit account in the card/passbook (hereinafter referred to collectively as the special account);
4.4 List of pledged accounts receivable;
4.5 Others: .
According to Party D’s requirements, Party B □ shall □ may not (express with “√”in □ for option and “×”in □ for deletion) handle insurance for the pledged property under this Contract. If Party B may not handle insurance for the pledged property under this Contract, the insurance clauses of this Contract shall be inapplicable.
Article 5 Party B shall submit to Party D the pledged property under this Contract (document of title where it is pledged with rights) on the date of signature of this Contract, or Party B shall go through the formalities for pledge registration with the relevant pledge registration organ within fifteen days as of the date of effectiveness of this Contract. If the formalities for pledge registration for the pledged property hereunder are not handled due to causes attributable to Party B, Party D may charge Party B penalty according to the following standard: % of the amount of secured principal creditor’s rights. Should the document of title be endorsed for pledge or transfer according to the provisions of relevant laws, Party B shall endorse the document of title and indicate the pattern “Pledge” prior to delivery of the document of title.
Article 6 Where the pledged property is accounts receivable, Party B shall open with Party D a special account for repayment of loan pledged with accounts receivable, account No. , specifically for collecting the accounts receivable that the debtor of the accounts receivable pays Party B. Party B agrees to provide pledge guarantee for Party D with the funds in the special account. Without Party D’s consent, Party B shall have no right to use any money in the special account.
Article 7 Both Party B and Party D confirm that the value of the pledged property hereunder is RMB (in words) (in figures ¥ ) when this Contract is signed. The (appraisal / agreement) value is provided for reference only and the final value of the pledged property shall accord with the funds (or net incomes) from actual disposal of the pledged property when the right to pledge is realized.
Article 8 In the event that the document of title pledged hereunder expires earlier than the maturity date of the debts under the Main Contract (or Party D announces early maturity according to the stipulations of the Main Contract), Party D may cash or take delivery of goods after the maturity of the pledged document of title, and dispose the cashed money or the incomes obtained from sales of the goods according to any one of the following methods:
8.1 To prepay all the debts guaranteed by Party B under the Main Contract;
8.2 To draw and deposit to a third party;
8.3 To deposit in the fixed deposit account or security deposit account (special account, same below) in the card that Party B opened with Party D, account No. (card No.): , continuously used as pledge guarantee for the creditor’s rights under the Main Contract.
Article 9 The co-owner of the pledged property under this Contract agrees to pledge the pledged property hereunder and agrees to accept the terms and conditions of this Contract.
Pledged property co-owner (1) , Identity certificate Name and No.:
Pledged property co-owner (2) , Identity certificate Name and No.:
Chapter 4 Mortgage
Article 10 Party C is willing to provide maximum mortgage guarantee for all the debts under the Main Contract with the property listed in the following . Refer to annex 2 for the mortgaged property in details:
10.1 List of Mortgaged Property (Movable Property);
10.2 List of Mortgaged Property (Real Estate);
10.3 List of Mortgaged Property (Transport Means) ;
10.4 List of Mortgaged Property ( )
According to Party D’s requirements, Party C □ shall □ may not (express with “√”in □ for option and “×”in □ for deletion) handle insurance for the mortgaged property under this Contract. If Party C may not handle insurance for the mortgaged property under this Contract, the insurance clauses of this Contract shall be inapplicable.
Article 11 Both Party C and Party D confirm that the value of the mortgaged property hereunder is RMB (in words) (in figures ¥ ). The (appraisal / agreement) value is provided for reference only and the final value of the mortgaged property shall accord with the funds (or net incomes) from actual disposal of the mortgaged property when the right to mortgage is realized.
Article 12 The co-owner of the mortgaged property under this Contract agrees to mortgage the mortgaged property hereunder and agrees to accept the terms and conditions of this Contract.
Mortgaged property co-owner (1) , Identity certificate Name and No.:
Mortgaged property co-owner (2) , Identity certificate Name and No.:
Article 13 Party C and Party D shall, within fifteen days as of the date of effectiveness of this Contract, go through the formalities for mortgage registration with the relevant mortgage registration organ. If the formalities for mortgage registration for the mortgaged property hereunder are not handled due to causes attributable to Party C, Party D may charge Party C penalty according to the following standard: % of the amount of secured principal creditor’s rights.
Chapter 5 Liability for breach
Article 14 Party A, Party B and Party C shall perform their obligations specified in this Contract. Party A, Party B or Party C’s failure to wholly or partly perform its obligations specified herein shall constitute a default. In case of any default, Party D shall have the right to choose any one or several of the following measures to ask the default party to bear liability for breach:
14.1 The default party shall pay a penalty equivalent to 20 % of the amount of creditor’s rights under the Main Contract. Where the penalty is not enough to make up Party D’s losses, the default party shall make compensation for the actual losses.
14.2 Party D has the right to ask the default party to undertake guarantee liability.
Chapter 6 Dispute resolution
15. The parties related to this contract all disputes should talk things over solve. If negotiation fails, the parties agree to select any of the following ways to solve (could choose a solution).
√ Directly to the supplier in accordance with the local people's court that has jurisdiction over the.
× Submitted to the arbitration commission for arbitration. Arbitration for a ruling.
16. Compulsory execution notary:
× The parties agreed to the notary office (hereinafter referred to as the "notary office") to apply for the contract notarization and application gives its enforcement effectiveness.
Chapter 7 Miscellaneous
17. Others agreed by the Parties hereto:
18. The first part of this contract is signed, the second part to the terms page, two parts constitute the integral part of this contract, the parties before signing the first part, should be carefully read the second part of the terms, if you have don't understand you should consult with a supplier immediately. All parties in the relevant rights and obligations on the parties and the limitation of liability or be exempted from the terms of the legal implications have accurate understanding after signed this contract.
19. This Contract has been made out in two originals for Party D holding one and for the other parties each holding one , which shall be equally authentic.
20. By each party hereto this contract signed on November 14, 2017 in shenzhen.
Party A: | (Seal) | |
Legal Representative / Principal | Pan Dangyu (Signature) | (Signature or Seal) |
(or Authorized Agent)
(Note: signature is required only if Party A is a natural person.)
Party B and Co-owner: | (Seal) |
Legal Representative / Principal | (Signature or Seal) |
(or Authorized Agent) | |
(Note: signature is required only if Party B and the co-owner is a natural person.) |
Party C and Co-owner: | (Seal) |
Legal Representative / Principal | (Signature or Seal) |
(or Authorized Agent)
(Note: signature is required only if Party C and the co-owner is a natural person.)
Party D: CHINA MINSHENG BANKING CORP., LTD. SHENZHEN BRANCH (Special Seal for Comprehensive Credit Granting Contract Uses Only)
Legal Representative / Principal | (Signature) | (Signature or Seal) |
(or Authorized Agent)
Part 2
Chapter 1 Representations and warranties
Article 1 For the purpose of signing and performing this Contract, the Guarantor hereby gives to the other parties hereto the following representations and warranties:
1.1 The Guarantor acknowledges and agrees all the terms and conditions of the Main Contract, and is willing to provide guarantee for the Debtor under the Main Contract;
1.2 The Guarantor has sufficient capacity for civil rights and capacity for civil conducts. The Guarantor has obtained enough authorization for concluding and performing this Contract;
1.3 The Guarantor ensures good credit status and no major bad credit record;
1.4 The Guarantor ensures not to refuse the performance of guarantee obligation for an excuse of any dispute with a third party;
1.5 The Guarantor is willing to accept Party D’s investigation and understanding of the credit status and performance capability of the Guarantor. The Guarantor ensures to provide relevant information and data faithfully, including personal career, marital state, conditions of assets, incomes, expenditures, liabilities and external security;
1.6 The Guarantor ensures that the explanation and certification concerning its credit conditions, financial and accounting statements or other related data and materials provided by Party D are genuine and legitimate and have no false representation and concealed information. During the valid period of this Contract, the Guarantor shall provide financial statements and materials (including but not limited to balance sheet, income statement and cash flow statement) faithfully according to Party D’s requirements and positively coordinate Party D to investigate, understand and supervise the Guarantor’s production, operating and finance conditions;
1.7 During the period of conclusion of this Contract and the valid period of this Contract, the Guarantor shall not provide any third party with guarantee in any form without Party D’s consent;
1.8 The Guarantor ensures that, when this Contract is signed, the Guarantor has never have nor has any litigation, arbitration, administrative proceeding, or any executive proceeding of juridical or administrative authorities which are presented and may have major adverse effect on the Guarantor’s performance of guarantee liability, or other potential major dispute; meanwhile, the Guarantor has no major debt or contingent liability which has not disclosed to Party D;
1.9 If the legal registered name or effective identity certificate number of the Guarantor is changed, the Guarantor shall, within five days as of the date of obtaining of the official document and/or certificate changed, notify Party D in written form and submit the originals and copies of the document/certificate changed to Party D for examination;
1.10 Party B and Party C ensure that they are the lawful owner or disposer of the mortgaged / pledged property under this Contract. If the mortgaged / pledged property hereunder is commonly owned, they have obtained the co-owner’s consent;
1.11 Party B and Party C ensure that the establishment of mortgage / pledge under this Contract will not be restricted nor cause illegal situation;
1.12 Party B and Party C ensure that all the certificates of property right or use right of the mortgaged / pledged property and other effective proof documents that they provide or submit to Party D are genuine, legitimate and valid;
1.13 Party B and Party C ensure that the mortgaged / pledged property under this Contract has not been leased before the establishment of guarantee, or has been leased but Party D was notified in written form. If the mortgaged property hereunder is leased after the establishment of guarantee, Party C shall ensure to obtain Party D’s consent in advance and notify the lessee of the establishment of guarantee;
1.14 Party B and Party C ensure not to conduct any activity in violation of national laws and regulations by taking advantage of the guaranteed property under this Contract.
1.15 Party B and Party C ensure that they have not disposed or established other guarantee for the guaranteed property hereunder prior to the signature of this Contract, or they have established any other guarantee and have notified Party D in written form; there is not other third party’s right to the guaranteed property; without Party D’s written consent, they shall not present, transfer, re-mortgage or dispose the mortgaged property in any other from prior to the cancellation of guarantee pursuant to this Contract.
1.16 Where the mortgaged property under this Contract is a real estate, Party B shall ensure to notify Party D of the renewal information immediately after it obtains the information about removal of the mortgaged real estate;
1.17 Without Party D’s written consent, Party B shall not ask for unfreezing, reporting for loss, withdrawing in advance or disposing the pledged property in any other form by any excuse;
1.18 Where the pledged property under this Contract is a deposit certificate of Party B in other bank, Party B shall ensure to coordinate Party D to complete the formalities for mortgagee of the deposit certificate and other formalities required by Party D prior to delivery of the relevant document of title, and the fixed deposit must be taken with a seal impression or password. Party B shall ensure to provide Party D with the seal impression reserved in the deposit bank. Where the pledged property under this Contract is the right of a deposit certificate or accounts receivable, Party B shall coordinate Party D to complete the formalities for obtaining the deposit bank’s confirmation letter and the accounts receivable debtor’s confirmation letter prior to delivery of the relevant document of title;
1.19 In case of omission or error of the contents registered for guarantee or any change of the registered contents, Party B and Party C agree Party D or others entrusted by Party D to continuously handle the formalities for registration of change according to the actual situations and the conditions after change.
1.20 if the guarantor is a person in the housing or car sellers, should also:
1.20.1 ensure timely handle the house ownership and state-owned land to use card (if any) or parking property right card, and after the above card completed, try our best to help the supplier or its designated agents to handle the registration of mortgage on the property or parking, and will he xiang he xiang of state-owned land (if any) and hold to the supplier.
1.20.2 if the principal check-out/car, change rooms/car, sell or other lead to terminate the contract that buy a house/car a contract, promise to cooperate with supplier in advance to recover the principal owed all loan principal and interest and other accounts payable and shall, in accordance with the corresponding warranty for this contract.
Party a guarantees housing a total of 1.21 people written consent of the mortgaged property as borrowing provided under this contract, the mortgage security at maximum amount and accept all the terms and conditions of this contract.
1.22 guarantor acknowledge and agree to the secured creditor's rights under the main contract, in accordance with the provisions of the main contract may occur in the supplier and the main contract, the debtor and the debtor designated supplier "and the main contract with lines of the third party (including but not limited to the main contract the debtor business entity or other designated third party), between the guarantor does not represent any objection to that, d for the main contract under agreed to give priority to contract the debtor and the quota of choose and employ persons does not guarantee repayment rights in accordance with the provisions of the contract.
Article 2 For the purpose of signing and performing this Contract, Party D hereby gives the following representations and warranties:
2.1 Party D has obtained sufficient authorization for signing and concluding this Contract;
2.2 Party D promises to keep confidential the other parties’ information and business secrets acquired during the performance of this Contract, unless otherwise prescribed by laws and regulations.
Chapter 2 Guarantee
Article 3 The guarantee scope of any one guarantor shall be the principal of the guaranteed principal creditor’s rights specified in this Contract and other accounts payable. Other accounts payable include interest, default interest, compound interest, penalty, damages, expenses for realization of creditor’s rights and guarantee right (including but not limited to legal cost, attorney fee, business traveling expenses, expenses for settlement of the real estate mortgagor and maintenance cost) and all other reasonable expenses payable. Other accounts payable covered in the said scope shall be listed in the scope of guarantee liability that one guarantor shall undertake but shall not be listed in the maximum limit of balance of the principal secured under this Contract.
Article 4 In the event that the Debtor under the Main Contract changes the loan purpose privately, one guarantor shall bear guarantee liability for the main debts under the Main Contract and the default interest and penalty arising from misappropriation of loan, except that Party D and the Debtor under the Main Contract have malicious collaboration.
Article 5 As agreed by all the Parties hereto, Party D is entitled to announce determination of the principal creditor’s rights under the maximum guarantee in any event of default, except under the circumstances prescribed by laws.
Article 6 Party D is entitled to exercise the guarantee right if (1) the performance period of the debts specified in the Main Contract expires (including early maturity of debts announced by Party D in accordance with the Main Contract) and the Debtor under the Main Contract fails to repay the debts according to the stipulations of the Main Contract; or (2) there is any breach of contract specified in the Main Contract; or (3) there is any circumstance under which the Guarantor shall bear liability for breach according to the stipulations of this Contract.
Article 7 Party D is entitled to exercise the guarantee right for the guaranteed property by the following method:
7.1 Through consultation with the Guarantor, discount the guaranteed property to offset debts or be compensated firstly from the incomes obtaining from selling at auction or selling off the guaranteed property;
7.2 Apply to the people’s court for selling at auction or selling off the guaranteed property, and be compensated firstly from the incomes therefrom;
7.3 Where the pledged property is accounts receivable, besides sub-clause 7.1 and sub-clause 7.2, Party D is entitled to take the following methods for exercising the right to pledge the pledged property:
7.3.1 Party B is compensated firstly from the funds paid by the debtor of the accounts receivable;
7.3.2 Through concluding an agreement with Party B, Party B transfers the accounts receivable under this Contract to Party D for disposal;
7.4 Where the pledged property is the deposit in the special account, Party D is entitled to deduct relevant money directly from the special account for repaying debts;
7.5 Where the pledged property hereunder is any right, besides sub-clause 7.1 and sub-clause
7.2, Party D is entitled to dispose the pledged property unilaterally by the following methods:
7.5.1 Transfer the pledged right or allow others to use the pledged right and be compensated firstly from the transfer fee and licensing fee obtained therefrom;
7.5.2 Cash the document of title or sell of the goods taken, and be compensated firstly from the funds obtained therefrom.
Article 8 At the request of Party D, one guarantor requested must assist Party D in obtaining all necessary approvals or agreements related to realization of the creditor’s rights of Party D, or assist Party D in handling all the necessary procedures.
Article 9 The funds obtained by Party D from exercising the guarantee right under this Contract shall be used for repaying the debts of Party D according to the following order: (1) expenses for realization of creditor’s rights and guarantee right; (2) penalty; (3) damages; (4) compound interest; (5) default interest; (6) interest; (7) principal. Party D is entitled to change this order.
Article 10 Insurance for the guaranteed property
10.1 Should Party B and Party C handle insurance for the guaranteed property according to Party D’s requirements, Party B and Party C shall handle insurance procedures for the guaranteed property taking Party D as the sole beneficiary or insurant in the insurance company which is accepted through consultation. When this Contract is signed, the Guarantor shall submit the original of the insurance policy for the guaranteed property to Party D for keeping.
10.2 The insurance contract shall be accepted by Party D. There shall be no clause damaging or restricting Party D’s rights and interests in the insurance contract. The insurance shall be kept effective all the time before the termination of this Contract and shall not be interrupted or cancelled by any excuse. If insurance is interrupted, Party D shall have the right to handle insurance procedures on behalf and all the expenses arising therefrom shall be borne by the related guarantor. The related guarantor shall not conduct any behavior which may result in the insurance company’s refusal of claim settlement.
10.3 The related guarantor shall not conduct any behavior which may result in the insurance company’s refusal of claim settlement, or the related guarantor shall bear the legal consequences arising therefrom;
10.4 In case of any insurance accident prior to repayment of all the debts by the Debtor under the Contract, the insurance compensation shall be taken as the guaranteed property under this Contract and be deposited in the account designated by Party D.
Article 11 If the Debtor under the Contract and Party D have an agreement to amend the Main Contract, increase of the principal of the principal creditor’s rights, extension of the period of the Main Contract and transfer of debts by the Debtor under the Contract shall be consented by the Guarantor, and the other changes may not be consented by the Guarantor. All the guarantors promise to undertake guarantee liability according to the contract amended.
Article 12 The guarantee liability undertaken by the Guarantor may not be affected by, nor be exempted or reduced due to, other guarantees under the Main Contract and this Contract. Party D is entitled to claim one guarantor for guarantee right. All the guarantors under this Contract waive the priority of defense right for any other guarantee (including but not limited to right of plea for preference claims and defense on the self things of the debtor).
Article 13 As agreed by the Guarantor, Party D has the right to transfer any or all of its principal creditor’s rights under this Contract to a third party. Party D may not obtain the Guarantor’s consent nor notify the Guarantor when Party D transfers its principal creditor’s rights.
Article 14 Where the pledged property is accounts receivable, in addition to other terms and conditions of this Contract, Party B shall also observe the following terms and conditions:
14.1 When this Contract is signed, Party B shall submit to Party D the original of the basic contract which has been concluded under this Contract and the original of relevant document of title for other accounts receivable (if any). Party B shall ensure to submit to Party D all the basic contracts signed after the conclusion of this Contract within five working days after the signature of such a contract;
14.2 If Party B applies to Party D for withdrawing and using the funds in the special account for repayment of pledge loan of the accounts receivable after the debtor of the accounts receivable pays the funds to the special account for repayment of pledge loan of the accounts receivable specified in this Contract, Party B shall submit the proof materials accredited by Party D and supplement relevant accounts receivable to the special account for repayment of pledge loan of the accounts receivable, or Party D shall have the right to refuse Party B’s application;
14.3 In the event that the period for the debtor of the accounts receivable to perform the obligation of payment expires earlier than the expiry date of the performance period of the debts under the Main Contract, Party D may use the money paid by the debtor of the accounts receivable to prepay the principal creditor’s rights secured hereunder or deposit the money to the special account for repayment of pledge loan of the accounts receivable opened by Party B with Party D, when the money may be continuously taken as the pledge guarantee for the principal creditor’s rights secured hereunder or be withdrawn or deposited to a third party.
Article 15 In addition to other terms and conditions of this Contract, Party A shall also observe the following terms and conditions:
15.1 The guarantee period under this Contract shall be from the date of effectiveness of this Contract to two years after the expiry date of the period for performance of debts by the Debtor under the Main Contract specified in the Main Contract. If the business under the Main Contract is bank acceptance or bank guarantee, the date of external payment shall be deemed as the expiry date of the performance period of the debt. If the business is discount of draft, payment refusal date of the draft shall be deemed as the expiry date of the performance period of the debt.
15.2 If Party D requests Party A to undertake guarantee liability according to the stipulations of this Contract, Party D is entitled to choose by itself to exercise the right of set-off directly from the Guarantor’s any other account (including but not limited to current deposit or fixed deposit) opened with any breach of China Minsheng Banking Corp. Ltd. or ask the Debtor under the Main Contract to make repayment continuously. In case of interest loss and any other loss caused due to such deduction behavior, Party D shall bear no liability and shall not be deemed as a waiver of the right for asking the debtor to make repayment continuously and bearing expansion of loss for an excuse of no deduction.
15.3 After Party D claims to exercise the guarantee right and requests Party A to undertake guarantee liability, if Party A agrees to establish new maximum joint guarantee liability pursuant to this Contract to guarantee all the principal creditor’s rights of Party D under the Main Contract, it is unnecessary to make and enter into a new contract for the newly established maximum guarantee.
Article 16 If the Guarantor adds new guaranteed property after the establishment of Party D’s guarantee right under this Contract, all the Parties agree to establish new maximum guarantee for the new guaranteed property pursuant to this Contract to guarantee all the principal creditor’s rights of Party D under the Main Contract, and it is unnecessary to make and enter into a new contract for the newly established maximum guarantee.
If there is any remaining of the guaranteed property after Party D exercises the guarantee right, all the Parties agree to establish new maximum guarantee for the remaining guaranteed property pursuant to this Contract to guarantee all the principal creditor’s rights of Party D under the Main Contract, and it is unnecessary to make and enter into a new contract for the newly established maximum guarantee.
Chapter 3 Rights and obligations
Article 17 Rights and obligations of the Guarantor
17.1 The Guarantor acknowledges and agrees all the terms and conditions of the Main Contract, and is willing to sign this Contract ad provide guarantee for the debts under the Main Contract;
17.2 All the expenses for relevant guarantees under this Contract, including but not limited to the expenses for attorney service, tax, property insurance, notarization, appraisal, evaluation, registration and transfer of household, shall be determined by the Parties hereto through consultation in accordance with relevant laws and regulations;
17.3 If Party D agrees to transfer the guaranteed property under this Contract, the Guarantor shall use the funds obtained from transfer of the guaranteed property to repay Party D all the debts guaranteed under the Main Contract or deposit the funds obtained therefrom to the account opened by Party D as the special pledge, or upon consent by Party D, withdraw and deposit the funds to a third party;
17.4 During the valid period of this Contract, Party D shall be notified in writing immediately when there is any event (including but not limited to major change of financial and assets conditions, or involved in litigation, arbitration or administrative punishment, or any other events which may affect one guarantor’s guarantee capability) which endangers one guarantor’s normal business or has adverse effect on one guarantor’s performance of the guarantee obligation under this Contract;
17.5 Party D shall be notified one month in advance if one guarantor has the following changes, including merger, division, combination, shareholding reform, contracting, lease, joint operation, applying for suspension of business for rectification, applying for dissolution, applying for reconciliation /reorganization /bankruptcy, or transferring or disposing any significant assets in other forms, and other behaviors which are enough to affect Party D’s rights and interests;
17.6 If the Guarantor’s name, legal representative, address or permanent dwelling address, mailing address, work unit or contact information is changed, Party D shall be notified within five days after the change;
17.7 During the period of the loan, the Guarantor agrees and authorizes Party D to provide the individual/enterprise credit information and relevant guarantee conditions provided by the Guarantor for the individual enterprise credit information database of the People’s Bank of China and the credit database established upon approval by the competent credit investigation authorities;
17.8 The mortgaged property under this Contract shall be occupied, managed and used by Party C. Party C shall keep properly and use reasonably the mortgaged property to ensure the mortgaged property under sound conditions without any damage. Party D is entitled to check the conditions of management and use of the mortgaged property;
17.9 If the mortgaged property is or may be infringed by any a third party, Party C shall have the obligation to take measures to avoid infringement. In case of damage to or loss of the mortgaged property, Party C shall notify Party D timely and take measures immediately to prevent expansion of losses. Meanwhile, Party C shall timely submit to Party D the certificates of damage and loss causes issued by the relevant competent authorities;
17.10 In the event that the Debtor under the Main Contract fails to repay debts on time (including Party D announces early maturity of the debts in accordance with the stipulations of the Main Contract) as agreed in the Main Contract, Party A shall perform the obligation of repayment on behalf immediately after Party D requests Party A to undertake guarantee liability;
17.11 If the pledged property is damaged or the value of the pledged property is decreased, which is enough to endanger Party D’s rights, Party D shall have the right to request Party B to provide relevant guarantee. In the event that Party B fails to provide relevant guarantee, Party D may unilaterally sell at auction or sell of the pledged property and use the funds obtained therefrom to prepay all the debts guaranteed by Party B under the Main Contract or withdraw and deposit to a third party;
17.12 Where the guaranteed property under this Contract is the deposit in the special account, Party B shall open a special account with Party D on the date of signature of this Contract and deposit the agreed amount of money in the special account. During the pledge period, deposit interest shall be calculated according to corresponding deposit interest rate of the bank. The fruits produced during the pledge period shall be listed in the pledged property under this Contract.
Article 18 Rights and obligations of Party D
18.1 Party D shall keep confidential the materials provided by the other Parties hereto, unless otherwise prescribed by laws and regulations;
18.2 During the valid period of this Contract, Party D is entitled to ask the Guarantor to coordinate Party D in investigating, understanding and supervising the Guarantor’s production, operating and financial conditions; Party D is entitled to ask the Guarantor to provide financial statements and other relevant materials faithfully;
18.3 Party D is entitled to claim the other Parties hereto for liability for breach or ask the other Parties hereto to make compensation to Party D for the actual losses caused to Party D according to the stipulations of this Contract;
18.5 If Party C’s behavior is enough to reduce the value of the mortgaged property, Party D shall have the right to ask Party C to stop such behavior immediately. When the value of the mortgaged property is reduced, Party D shall have the right to ask Party C to restore the value of the mortgaged property or ask Party C to provide a guarantee equivalent to the value reduced. Where Party C does not recover the value of the mortgaged property nor provide a guarantee, Party D shall have the right to ask the Debtor under the Main Contract to prepay debts or provide a new guarantee in full amount;
18.6 When all the debts within the scope of mortgage guarantee specified in this Contract are fully repaid on schedule, Party D shall assist Party C in handling the formalities for cancellation of mortgage registration. The certificate of property right or use right of the mortgaged property, and relevant effective proof documents, if kept by Party D, shall be returned to Party C;
18.7 Where the guaranteed property under this Contract is the deposit in a special account, Party D shall have the right to freeze the deposit in the said special account. The deposit cannot be unfroze until the debts under the Main Contract are fully repaid, except that Party D deducts money from the account for repaying the debts under the Main Contract as specified in this Contract.
18.8 party D have the right to entrust a third party claims under this contract to evaluate timing corresponding guarantee property.
18.9 if the mortgaged property is property, the property is to be demolished, should be:
18.9.1 if units adopt property rights exchange compensation form, party D has right to ask the main contract the debtor immediately pay off under the main contract of creditor's rights, or demand party c to transfer property as the contract after the mortgaged property and to sign a mortgage contract, mortgage registration again, before the new mortgage registration is not complete, the main contract the debtor should be in accordance with the requirements of party D to provide other guarantees.
18.9.2 if demolition take compensation form, the supplier has the right to demand a compensation in party D and C like signed the pledge contract, certificates of deposit with compensation as the main contract; Or require the party c d open a margin account and signed the pledge contract, will be credited to the account as the primary compensation contract guarantees.
18.10 party D and principal debtor to deal with specific business contract or specific business application specific business contract without the consent of the guarantor agrees that also does not need to inform the guarantor again.
Chapter 4 Effectiveness, amendment and cancellation of the Contract
Article 19 This Contract shall come into force (1) upon the signature or seal by all the Parties to Party A other than Party D; and (2) as of the date when Party D makes signature and affixes its official seal /special seal for contract uses only. However, if one guarantor fails to sign this Contract, this Contract shall not be binding upon the guarantor which has not sign but shall be binding upon the other Parties which have signed.
Article 20 Allowed by law, the validity of this Contract shall be independent of the Main Contract and shall not be affected by the invalidity of the Main Contract.
Chapter 5 Dispute settlement
Article 21 Any and all disputes in connection with this Contract shall be settled by the Parties hereto through consultation. Where consultation fails, the dispute shall be governed by the local people’s court at the location where Party D's dwelling address is located.
Article 22 In the event that Party D adopts litigation proceeding for realizing creditor’s rights due to one party’s breach of contract, the default party shall bear the expenses paid by Party D for realizing creditor’s rights and guarantee right (including but not limited to attorney fee and traveling expenses).
Article 23 Enforce the notary clause
20.1 Jointly by the parties confirm: the parties have to the relevant laws, regulations and normative documents and enforcing the definition, content, procedure, effectiveness of notarization regulation have a completely clear understanding, the parties to a notary office to apply for this contract voluntarily give enforcement effect of notarization.
20.2 of this contract by the notarization department become have the enforcement effect of debt instrument. Party b, party c commitment: if the debtor fails to in accordance with the provisions of the main contract of the main contract pay off the loan principal and interest on schedule (including party a due to default by supplier request early ShouDai), party b and c will give up his right to appeal, voluntarily accept the people's court for enforcement. When the supplier can directly to the first part of article 14 of this contract agreed upon by the people's court that has jurisdiction for enforcement, and without judicial proceedings, party b and party c to d directly apply for enforcement of the right of defense.
20.3 party b, party c commitment: in the event of breach of this contract collateral obligation or other default situation, should be in supplier collection notice in writing to guarantee obligations within the time limit, otherwise the supplier can apply to the notary office to issue the certificate, then party b, party c within the time limit shall be notified in notarization to notarization to cooperate to complete the notarization debt through verification process. Party b and party c hereby confirm: if party b, party c delayed in notary office to ensure the guarantee obligations, can be regarded as party b and party c d single direction by default notarization of creditor's rights, the amount of party b, party c for notarization according to d single direction that put forward by the notary office and issue the certificate of the execution of the legal consequences resulting from fully recognized. 20.4 party b and party c confirmed: enforcing debt scope including agreed upon in the main contract of loan principal and interest, compound interest, default interest, penalty due to breach of contract and the supplier to pay for the exercise of rights of legal fare, arbitration fee, security fees, announcement fee, valuation fee, a word, auction fees, travel expenses, fees and other expenses that realize creditor's rights and other economic losses suffered by the result.
20.5 all about enforcing the provisions of the notarization takes precedence over the first part of article 14 of this contract shall be applicable to the dispute resolution clause.
20.6 party a, party b and party c guarantee: the contact address is contained in this contract, such as the contact information change, the parties will be duly delivered in the form of a written notice to the supplier and to obtain the return receipt. Otherwise, the supplier in accordance with this article first contract the contact method of the delivery related documents, whether or not party a, party b and party c, all within five working days from the date of issue, the supplier shall be deemed to have fulfilled delivery obligations. In this case, party a and party b, party c to d is waived notice by the right of defense.
Chapter 6 Supplementary provisions
Article 24 Notice and service
24.1 According to the stipulations of this Contract, any and all notices or written communications that one party sends to the other party shall be given by registered post, fax, special delivery or other communication means to the party's address given in the first page of this Contract;
24.2 If sent by registered post, the 4 th day after the said document or notice is posted shall be deemed as the date of service and receiving; if sent by fax, the date indicated in the receipt of successful delivery shall be deemed as the date of service and receiving; if sent by special delivery, the date when the special delivery person delivers the said document or notice to the receiver shall be deemed as the date of service and receiving. In case of any change of the contact information, the party of the change shall notify the other party in writing of the contact information changed within five days after the occurrence of change. Afterwards, the notices, documents or applications specified in this article shall be sent to the contact information changed.
Article 25 For the matters not provided herein, the Parties hereto may have additional agreements and conclude a written agreement as an annex to this Contract. Annexes to this Contract are an integral part of this Contract and shall have the same equal legal force as the text of this Contract.
Article 26 Contents of this Contract shall be determined upon consensus through consultation amongst the signatory Parties. Where there are special provisions, the provisions are supplemented and amended in Article 15 of this Contract. In case of any discrepancy between these special provisions and relevant clauses of this Contract, the special provisions given in Article 15 of this Contract shall prevail.
Article 27 The situations not agreed in this Contract or Party D’s failure to take actions immediately shall not be deemed as a waiver or restriction of Party D’s legal or agreed rights, unless otherwise stated by Party D.
Article 28 Headlines given in this Contract are provided for reading convenience only and shall not affect or restrict the contents and interpretation of relevant terms and conditions.
Exhibit 10.24(b)
Text Encoding: CMBC-HT041 (GS2007)
Maximum Guarantee Contract
(Applicable where the guarantor is a unit)
No.: GGBZ 2017 SSBZEZ No. 005-2
HUIZHOU HIGHPOWER TECHNOLOGY CO., LTD. (Seal)
CHINA MINSHENG BANKING CORP., LTD. SHENZHEN BRANCH (Seal)
CHINA MINSHENG BANKING CORP., LTD.
Maximum Guarantee Contract
Guarantor: Huizhou Highpower Technology Co., Ltd. (hereinafter referred to as Party A)
Address: Xinhu Industrial Development Zone, Ma’an Town, Huicheng District, Huizhou City
P. C.:
Legal Representative / Main Principal: Pan Dangyu
Tel.:
Fax:
Opening Bank:
Account No.:
Creditor: CHINA MINSHENG BANKING CORP., LTD. SHENZHEN BRANCH (hereinafter referred to as Party B)
Address:
P. C.: 518048
Legal Representative / Main Principal: Wu Xinjun
Tel.:
Fax:
In order to ensure the performance of the Main Contract made and entered into by and between Party B and SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD. (hereinafter referred to as “Debtor of the Main Contract”), Party A is willing to provide maximum guarantee for all/par of the debts under the Main Contract. IN WITNESS WHEREOF, Party A and Party B conclude and sign this Contract through friendly consultation in accordance with relevant national laws and regulations.
Chapter 1 Category of the Principal Creditor’s Right Guaranteed and Maximum Amount of Debts
Article 1 The Main Contract of this Contract is selected as follows:
þ The Comprehensive Credit Granting Contract of 2017 SSBZEZ No. 005 made and entered into by and between Party B and the Debtor of the Main Contract, this Contract, and the specific business contracts, applications IOU, and certificates of creditor’s rights or electronic data under this Contract shall constitute the Main Contract of this Contract;
x All of continuously made and entered into by and between Party B and the Debtor of the Main Contract during the period of the principal creditor’s right specified in Article 3 herein shall constitute the Main Contract of this Contract. The amount of all the outstanding principals used by the Debtor of this Contract at any time shall not exceed the limit specified in Article 2 herein. However, within this limit, the Debtor of the Main Contract may apply for recycling the limit of all the outstanding principals.
Article 2 The maximum amount of debts guaranteed by Party A is: (currency) RMB , (amount in words): twenty million Yuan only .
The maximum amount of debts is the maximum limit for balance of principals, defined as follows:
The maximum limit for balance of principals is the maximum limit for principals of principal creditor’s rights only. If the principal does not exceed the said limit, Party A is willing to undertake joint guarantee liability for all the accounts payable within the scope specified in Article 6 of this Contract.
Chapter 2 Period of the Principal Creditor’s Right Guaranteed
Article 3 The period of the principal credit’s right guaranteed under this Contract shall be from Nov 14, 2017 to Nov 14, 2018 . The stipulations of this article have the following meanings:
3.1 If the business specified in the Main Contract is a loan business, the date of release of each loan shall not be later than the expiry date of this period.
3.2 If the business specified in the Main Contract is a business of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods), the date of draft of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods) shall not be later than the expiry date of this period.
Chapter 3 Guarantee Method
Article 4 Joint liability guarantee is adopted as the method of guarantee by Party A.
Article 5 Besides the guarantee method specified in this Contract, if there is any other guarantee under the Main Contract (including the Debtor of the Main Contract provides mortgage/pledge guarantee for Party B to the extent of the Debtor’s own property), Party A’s guarantee liability undertaken for Party B shall not be affected by any other guarantee nor be exempted or reduced arising therefrom. Party B is entitled to select to exercise the guarantee right under this Contract first and Party A waives the prior right of defense of any other guarantee. If Party B’s priority to gain compensation from the said mortgage right/pledge right is lost or reduced due to Party B’s waiver of the mortgage right/pledge right for the property of the Debtor of the Main Contract for any reason or due to Party B’s change of the sequence or contents of the mortgage right/pledge right, as promised by Party A, Party A’s guarantee liability undertaken for Party B shall not be exempted or reduced.
Chapter 4 Scope of Guarantee
Article 6 Party A’s guarantee scope: the maximum principal of the principal creditor’s rights specified in Article 2 of this Contract and other accounts payable (including but not limited to interest, default interest, compound interest, penalty, damages, expenses for realizing creditor’s rights and guarantee right (including but not limited to legal cost, attorney fee and business traveling expenses), and all other reasonable expenses payable). Other accounts payable specified in the said scope shall be included in the scope of guarantee liability undertaken by Party A but shall not be included in the maximum limit for balance of principals guaranteed under this Contract.
Article 7 The funds (including the funds Party B obtains from exercising the right specified in sub-clause 12.2 of this Contract) that Party A pays Party B for the purpose for performing Party A’s responsibility under this Contract shall be paid according to the following order: (1) Party B’s expenses for realizing creditor’s rights and guarantee right; (2) damages; (3) penalty; (4) compound interest; (5) default interest; (6) interest; (7) principal. Party B is entitled to change the said order.
Chapter 5 Determination of the Creditor’s Right Guaranteed
Article 8 The creditor’s right guaranteed under this Contract shall be determined under any one of the following circumstances:
8.1 the period of the principal creditor’s right specified in Article 3 of this Contract expires;
8.2 the Main Creditor announces acceleration of all debts under the Main Contract by law or according to relevant stipulations of the Main Contract;
8.3 other circumstances for determining the creditor’s right guaranteed prescribed by law.
Article 9 When the creditor’s right guaranteed under this Contract is determined, the following shall become effective:
9.1 When the creditor’s right guaranteed under this Contract is determined, the outstanding creditor’s right under the Main Contract shall be included in the scope of the creditor’s right guaranteed no matter whether the performance period of the creditor’s right has expired or not or there is any other additional condition.
9.2 When the creditor’s right guaranteed under this Contract is determined, all funds other than principals specified in Article 6 of this Contract shall be included in the scope of the creditor’s right guaranteed no matter whether the funds have been occurred or not;
9.3 From the date when the creditor’s right guaranteed under this Contract is determined to the date of full repayment of the creditor’s right guaranteed, if the Debtor of the Main Contract fails to perform the obligation of repayment of debts, Party B shall have the right to directly claim Party A for compensation and Party A shall repay Party B relevant debts immediately.
Chapter 6 Guarantee Period
Article 10 The guarantee period of the guarantee liability undertaken by Party A shall be two years and the date of start shall be determined according to the following method:
10.1 If the expiry date of the performance period of a debt under the Main Contract is early than or equals to the date of determination of the creditor’s right guaranteed, the guarantee period of the guarantee liability undertaken by Party A for the debt shall start from the date of determination of the creditor’s right guaranteed;
10.2 If the expiry date of the performance period of a debt under the Main Contract is later than the date of determination of the creditor’s right guaranteed, the guarantee period of the guarantee liability undertaken by Party A for the debt shall start from the expiry date of the performance period of this debt;
10.3 The term “expiry date of the performance period of a debt” indicated in the preceding paragraph includes the expiry date of the debt when the Debtor of the Main Contract repays the debt by installments and also includes the expiry date of acceleration announced by the Creditor according to the stipulations of the Main Contract;
10.4 If the business under the Main Contract is a business of letter of credit, bank acceptance bill, letter of guarantee or letter of guarantee for the release of goods, the date of external payment shall be deemed as the expiry date of the performance period of the debt.
Chapter 7 Both Parties’ Rights and Obligations
Article 11 Rights and obligations of Party A
11.1 Party A is a legal person duly established and validly existing, has the capacity for civil rights and the capacity for civil conducts for signing and executing this Contract, and has obtained all necessary licenses, approvals, registration and files required for signature of this Contract;
11.2 All the internal authorization formalities required for Party A for signing this Contract have been completely handled and become fully effective. Party A’s signature of this Contract and performance of its obligations under this Contract shall not conflict with the current articles of association and the internal rules and regulations, or any other contract, agreement and document binding upon Party A.
11.3 Party A shall ensure the authenticity, legitimacy and effectiveness of the documents that Party A provides Party B for demonstrating Party A’s legal identity and its ability for performing the guarantee liability under this Contract;
11.4 When the creditor’s right guaranteed under this Contract is determined, if the Debtor of the Main Contract fails to perform the debt prior to the expiry date of the performance period of the debt, Party A shall have the obligation to make payment to Party b immediately on the date of receiving of Party B’s written notice;
11.5 When giving guarantee under this Guarantee Contract, Party A is not involved in any litigation or arbitration which may be sufficient to affect its ability for undertaking the guarantee liability under this Contract;
11.6 Party A shall not bear the guarantee liability under the Guarantee Contract when the Debtor of the Main Contract has repaid all the debts under the Main Contract on schedule;
11.7 During the guarantee period, Party B may transfer to a third party the creditor’s right under the Main Contract without obtaining Party A’s consent, and Party A shall continue to undertake guarantee liability;
11.8 If the Debtor of the Main Contract and Party B changes the Main Contract through signing an agreement, Party A’s consent may not be obtained if such change does not increase the Debtor’s debts. However, if such change extends the term or increases the amount of principle of the principal creditor’s right guaranteed by Party A or allows transfer of debts by the Debtor of the Main Contract, Party A’s consent shall be obtained. Party A commits to undertake guarantee liability according to the Main Contract after change;
11.9 During the valid period of this Contract, Party B shall be notified thirty days in advance where there is any change of Party A’s operation mechanism, registered capital, equity, or Party A sells, transfers or disposes by any other means its material assets. Party B shall be notified within seven days if Party A's address, name or legal representative is changed;
11.10 If Party A provides guarantee for any other third party during the valid period of this Contract, Party B’s rights and interests shall not be damaged.
11.11 Loans under the Main Contract may be used for borrowing for repaying. Party A is willing to undertake guarantee liability.
11.12 If the Debtor of the Main Contract changes the purpose of the funds at random, Party A shall undertake guarantee liability for the debts under the Main Contract and the default interest and penalty arising from misappropriation of funds.
Article 12 Rights and obligations of Party B
12.1 Party B is entitled to demand Party A at any time to provide the financial reports, financial statements or other data reflecting Party A’s operation conditions and credit status;
12.2 If Party B demands Party a to undertake guarantee liability according to the stipulations of this Contract, Party A authorizes Party B to deduct relevant funds directly from the account opened with the bank institutions of China Minsheng Banking designated by Party A. With respect to the part insufficient for deduction, Party B is entitled to make deduction from any other account opened by Party A with the bank institutions of China Minsheng Banking or demand Party A to make repayment. Party B shall not bear any responsibility for losses on interest and any other losses caused to Party A arising from Party B’s behavior of deduction;
12.3 Party A may not be notified when Party B and the Debtor of the Main Contract sign a specific business contract (or agreement) on a specific credit granting business under the Main Contract.
Chapter 8 Liabilities for Breach of Contract
Article 13 When this Contract becomes effective, Party A and Party B shall perform the obligations specified in this Contract. Any party which fails to wholly or partly perform its obligations specified herein shall undertake relevant liabilities for breach of contract and make compensation for losses caused to the other party.
Chapter 9 Contract Effectiveness, Change and Termination
Article 14 This Contract shall become effective when both Parties’ legal representatives/main principals or authorized agents sign or seal and both Parties affix their official seals/special contract seals.
Article 15 When the Contract comes into force, Party A and Party B shall not change or cancel the Contract in advance at random. Should the Contract be changed or cancelled, a written agreement shall be reached and concluded upon unanimity through consultation.
Chapter 10 Dispute Settlement
Article 16 Any and all disputes between Party A and Party B arising from and in connection with the execution of this Contract shall be settled through consultation between both Parties. Where consultation fails, the dispute shall be governed by the people’s court at the location where Party B is located.
Chapter 11 Supplementary Provisions
Article 17 Notice and service
17.1 Any and all notices or written communications that one party sends to the other party under this Contract, including (but not limited to) any and all written documents or notices which must be sent under this Contract, shall be sent by registered post, fax, special delivery or other means to the address of the other party given on the first page of this Contract;
17.2 If sent by registered post, the forth day after the said document or notice is posted shall be deemed as the date of service and receiving; if sent by fax, the date indicated in the receipt of being sent successfully shall be deemed as the date of service and receiving; if sent by special delivery, the date when the special person sends the said document or notice to the address of the addressee shall be deemed as the date of service and receiving. In case of change of any contact information, the related party shall notify the other party in writing of the contact information changed within seven days after such change. Then, the notices, documents or applications specified herein shall be sent according to the contact information after the change.
Article 18 The validity of this Contract shall be independent of this Contract and may not be affected by the invalidity of the Main Contract.
Article 19 Other provisions agreed by both Parties
Article 20 This Contract has been made out in two originals, for Party A, Party B and the related party each holding one, which shall be equally authentic.
Article 21 When this Contract is signed, Party B has explained and interpreted in details all the terms and conditions of this Contract to Party A, and both Parties have no objection to the terms and conditions of this Contract. Both Parties have accurate understanding of the legal meaning of their corresponding rights and obligations, limitation of responsibilities or disclaimers.
Article 22 Both Parties agree and authorize Party B irrevocably to report relevant information to the financial credit information database established by the State. Such information shall include the name, registered address and other related information of this institution, the transaction records, credit information and bad information (including failure to perform obligations of this Contract, the institution’s performance of obligations and enforcement ruled or judged by the people’s court, and other relevant bad information prescribed by laws and regulations) generated during business activities and performance activities of this institution under this Contract.
This Contract is signed by Party A and Party B in Shenzhen .
Party A: HUIZHOU HIGHPOWER TECHNOLOGY CO., LTD. (Seal) (Seal) | |
Legal Representative / Main Principal: | (Signature) |
Date: | |
Party B: CHINA MINSHENG BANKING CORP., LTD. SHENZHEN BRANCH (Seal) (Seal) | |
Legal Representative / Main Principal: | (Signature) |
(Or Authorized Agent) | (Signature or Seal) |
Date: |
Exhibit 10.24(c)
Text Encoding: CMBC-HT041 (GS2007)
Maximum Guarantee Contract
(Applicable where the guarantor is a unit)
No.: GGBZ 2017 SSBZEZ No. 005-1
Springpower Technology (Shenzhen) Co., Ltd. (Seal)
CHINA MINSHENG BANKING CORP., LTD. SHENZHEN BRANCH (Seal)
CHINA MINSHENG BANKING CORP., LTD.
Maximum Guarantee Contract
Guarantor: Springpower Technology (Shenzhen) Co., Ltd. (hereinafter referred to as Party A)
Address: Workshop Building A, Shunchao Industrial Zone, Renmin Road, Danhu Community, Guanlan Street, Bao’an District, Shenzhen City
P. C.:
Legal Representative / Main Principal: Pan Dangyu
Tel.:
Fax:
Opening Bank:
Account No.:
Creditor: CHINA MINSHENG BANKING CORP., LTD. SHENZHEN BRANCH (hereinafter referred to as Party B)
Address:
P. C.: 518048
Legal Representative / Main Principal: Wu Xinjun
Tel.:
Fax:
In order to ensure the performance of the Main Contract made and entered into by and between Party B and SHENZHEN HIGHPOWER TECHNOLOGY CO., LTD. (hereinafter referred to as “Debtor of the Main Contract”), Party A is willing to provide maximum guarantee for all/par of the debts under the Main Contract. IN WITNESS WHEREOF, Party A and Party B conclude and sign this Contract through friendly consultation in accordance with relevant national laws and regulations.
Chapter 1 Category of the Principal Creditor’s Right Guaranteed and Maximum Amount of Debts
Article 1 The Main Contract of this Contract is selected as follows:
þ The Comprehensive Credit Granting Contract of 2017 SSBZEZ No. 005 made and entered into by and between Party B and the Debtor of the Main Contract, this Contract, and the specific business contracts, applications IOU, and certificates of creditor’s rights or electronic data under this Contract shall constitute the Main Contract of this Contract;
x All of continuously made and entered into by and between Party B and the Debtor of the Main Contract during the period of the principal creditor’s right specified in Article 3 herein shall constitute the Main Contract of this Contract. The amount of all the outstanding principals used by the Debtor of this Contract at any time shall not exceed the limit specified in Article 2 herein. However, within this limit, the Debtor of the Main Contract may apply for recycling the limit of all the outstanding principals.
Article 2 The maximum amount of debts guaranteed by Party A is: (currency) RMB , (amount in words): twenty million Yuan only .
The maximum amount of debts is the maximum limit for balance of principals, defined as follows:
The maximum limit for balance of principals is the maximum limit for principals of principal creditor’s rights only. If the principal does not exceed the said limit, Party A is willing to undertake joint guarantee liability for all the accounts payable within the scope specified in Article 6 of this Contract.
Chapter 2 Period of the Principal Creditor’s Right Guaranteed
Article 3 The period of the principal credit’s right guaranteed under this Contract shall be from Nov 14, 2017 to Nov 14, 2018 . The stipulations of this article have the following meanings:
3.1 If the business specified in the Main Contract is a loan business, the date of release of each loan shall not be later than the expiry date of this period.
3.2 If the business specified in the Main Contract is a business of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods), the date of draft of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods) shall not be later than the expiry date of this period.
Chapter 3 Guarantee Method
Article 4 Joint liability guarantee is adopted as the method of guarantee by Party A.
Article 5 Besides the guarantee method specified in this Contract, if there is any other guarantee under the Main Contract (including the Debtor of the Main Contract provides mortgage/pledge guarantee for Party B to the extent of the Debtor’s own property), Party A’s guarantee liability undertaken for Party B shall not be affected by any other guarantee nor be exempted or reduced arising therefrom. Party B is entitled to select to exercise the guarantee right under this Contract first and Party A waives the prior right of defense of any other guarantee. If Party B’s priority to gain compensation from the said mortgage right/pledge right is lost or reduced due to Party B’s waiver of the mortgage right/pledge right for the property of the Debtor of the Main Contract for any reason or due to Party B’s change of the sequence or contents of the mortgage right/pledge right, as promised by Party A, Party A’s guarantee liability undertaken for Party B shall not be exempted or reduced.
Chapter 4 Scope of Guarantee
Article 6 Party A’s guarantee scope: the maximum principal of the principal creditor’s rights specified in Article 2 of this Contract and other accounts payable (including but not limited to interest, default interest, compound interest, penalty, damages, expenses for realizing creditor’s rights and guarantee right (including but not limited to legal cost, attorney fee and business traveling expenses), and all other reasonable expenses payable). Other accounts payable specified in the said scope shall be included in the scope of guarantee liability undertaken by Party A but shall not be included in the maximum limit for balance of principals guaranteed under this Contract.
Article 7 The funds (including the funds Party B obtains from exercising the right specified in sub-clause 12.2 of this Contract) that Party A pays Party B for the purpose for performing Party A’s responsibility under this Contract shall be paid according to the following order: (1) Party B’s expenses for realizing creditor’s rights and guarantee right; (2) damages; (3) penalty; (4) compound interest; (5) default interest; (6) interest; (7) principal. Party B is entitled to change the said order.
Chapter 5 Determination of the Creditor’s Right Guaranteed
Article 8 The creditor’s right guaranteed under this Contract shall be determined under any one of the following circumstances:
8.1 the period of the principal creditor’s right specified in Article 3 of this Contract expires;
8.2 the Main Creditor announces acceleration of all debts under the Main Contract by law or according to relevant stipulations of the Main Contract;
8.3 other circumstances for determining the creditor’s right guaranteed prescribed by law.
Article 9 When the creditor’s right guaranteed under this Contract is determined, the following shall become effective:
9.1 When the creditor’s right guaranteed under this Contract is determined, the outstanding creditor’s right under the Main Contract shall be included in the scope of the creditor’s right guaranteed no matter whether the performance period of the creditor’s right has expired or not or there is any other additional condition.
9.2 When the creditor’s right guaranteed under this Contract is determined, all funds other than principals specified in Article 6 of this Contract shall be included in the scope of the creditor’s right guaranteed no matter whether the funds have been occurred or not;
9.3 From the date when the creditor’s right guaranteed under this Contract is determined to the date of full repayment of the creditor’s right guaranteed, if the Debtor of the Main Contract fails to perform the obligation of repayment of debts, Party B shall have the right to directly claim Party A for compensation and Party A shall repay Party B relevant debts immediately.
Chapter 6 Guarantee Period
Article 10 The guarantee period of the guarantee liability undertaken by Party A shall be two years and the date of start shall be determined according to the following method:
10.1 If the expiry date of the performance period of a debt under the Main Contract is early than or equals to the date of determination of the creditor’s right guaranteed, the guarantee period of the guarantee liability undertaken by Party A for the debt shall start from the date of determination of the creditor’s right guaranteed;
10.2 If the expiry date of the performance period of a debt under the Main Contract is later than the date of determination of the creditor’s right guaranteed, the guarantee period of the guarantee liability undertaken by Party A for the debt shall start from the expiry date of the performance period of this debt;
10.3 The term “expiry date of the performance period of a debt” indicated in the preceding paragraph includes the expiry date of the debt when the Debtor of the Main Contract repays the debt by installments and also includes the expiry date of acceleration announced by the Creditor according to the stipulations of the Main Contract;
10.4 If the business under the Main Contract is a business of letter of credit, bank acceptance bill, letter of guarantee or letter of guarantee for the release of goods, the date of external payment shall be deemed as the expiry date of the performance period of the debt.
Chapter 7 Both Parties’ Rights and Obligations
Article 11 Rights and obligations of Party A
11.1 Party A is a legal person duly established and validly existing, has the capacity for civil rights and the capacity for civil conducts for signing and executing this Contract, and has obtained all necessary licenses, approvals, registration and files required for signature of this Contract;
11.2 All the internal authorization formalities required for Party A for signing this Contract have been completely handled and become fully effective. Party A’s signature of this Contract and performance of its obligations under this Contract shall not conflict with the current articles of association and the internal rules and regulations, or any other contract, agreement and document binding upon Party A.
11.3 Party A shall ensure the authenticity, legitimacy and effectiveness of the documents that Party A provides Party B for demonstrating Party A’s legal identity and its ability for performing the guarantee liability under this Contract;
11.4 When the creditor’s right guaranteed under this Contract is determined, if the Debtor of the Main Contract fails to perform the debt prior to the expiry date of the performance period of the debt, Party A shall have the obligation to make payment to Party b immediately on the date of receiving of Party B’s written notice;
11.5 When giving guarantee under this Guarantee Contract, Party A is not involved in any litigation or arbitration which may be sufficient to affect its ability for undertaking the guarantee liability under this Contract;
11.6 Party A shall not bear the guarantee liability under the Guarantee Contract when the Debtor of the Main Contract has repaid all the debts under the Main Contract on schedule;
11.7 During the guarantee period, Party B may transfer to a third party the creditor’s right under the Main Contract without obtaining Party A’s consent, and Party A shall continue to undertake guarantee liability;
11.8 If the Debtor of the Main Contract and Party B changes the Main Contract through signing an agreement, Party A’s consent may not be obtained if such change does not increase the Debtor’s debts. However, if such change extends the term or increases the amount of principle of the principal creditor’s right guaranteed by Party A or allows transfer of debts by the Debtor of the Main Contract, Party A’s consent shall be obtained. Party A commits to undertake guarantee liability according to the Main Contract after change;
11.9 During the valid period of this Contract, Party B shall be notified thirty days in advance where there is any change of Party A’s operation mechanism, registered capital, equity, or Party A sells, transfers or disposes by any other means its material assets. Party B shall be notified within seven days if Party A's address, name or legal representative is changed;
11.10 If Party A provides guarantee for any other third party during the valid period of this Contract, Party B’s rights and interests shall not be damaged.
11.11 Loans under the Main Contract may be used for borrowing for repaying. Party A is willing to undertake guarantee liability.
11.12 If the Debtor of the Main Contract changes the purpose of the funds at random, Party A shall undertake guarantee liability for the debts under the Main Contract and the default interest and penalty arising from misappropriation of funds.
Article 12 Rights and obligations of Party B
12.1 Party B is entitled to demand Party A at any time to provide the financial reports, financial statements or other data reflecting Party A’s operation conditions and credit status;
12.2 If Party B demands Party a to undertake guarantee liability according to the stipulations of this Contract, Party A authorizes Party B to deduct relevant funds directly from the account opened with the bank institutions of China Minsheng Banking designated by Party A. With respect to the part insufficient for deduction, Party B is entitled to make deduction from any other account opened by Party A with the bank institutions of China Minsheng Banking or demand Party A to make repayment. Party B shall not bear any responsibility for losses on interest and any other losses caused to Party A arising from Party B’s behavior of deduction;
12.3 Party A may not be notified when Party B and the Debtor of the Main Contract sign a specific business contract (or agreement) on a specific credit granting business under the Main Contract.
Chapter 8 Liabilities for Breach of Contract
Article 13 When this Contract becomes effective, Party A and Party B shall perform the obligations specified in this Contract. Any party which fails to wholly or partly perform its obligations specified herein shall undertake relevant liabilities for breach of contract and make compensation for losses caused to the other party.
Chapter 9 Contract Effectiveness, Change and Termination
Article 14 This Contract shall become effective when both Parties’ legal representatives/main principals or authorized agents sign or seal and both Parties affix their official seals/special contract seals.
Article 15 When the Contract comes into force, Party A and Party B shall not change or cancel the Contract in advance at random. Should the Contract be changed or cancelled, a written agreement shall be reached and concluded upon unanimity through consultation.
Chapter 10 Dispute Settlement
Article 16 Any and all disputes between Party A and Party B arising from and in connection with the execution of this Contract shall be settled through consultation between both Parties. Where consultation fails, the dispute shall be governed by the people’s court at the location where Party B is located.
Chapter 11 Supplementary Provisions
Article 17 Notice and service
17.1 Any and all notices or written communications that one party sends to the other party under this Contract, including (but not limited to) any and all written documents or notices which must be sent under this Contract, shall be sent by registered post, fax, special delivery or other means to the address of the other party given on the first page of this Contract;
17.2 If sent by registered post, the forth day after the said document or notice is posted shall be deemed as the date of service and receiving; if sent by fax, the date indicated in the receipt of being sent successfully shall be deemed as the date of service and receiving; if sent by special delivery, the date when the special person sends the said document or notice to the address of the addressee shall be deemed as the date of service and receiving. In case of change of any contact information, the related party shall notify the other party in writing of the contact information changed within seven days after such change. Then, the notices, documents or applications specified herein shall be sent according to the contact information after the change.
Article 18 The validity of this Contract shall be independent of this Contract and may not be affected by the invalidity of the Main Contract.
Article 19 Other provisions agreed by both Parties
Article 20 This Contract has been made out in two originals, for Party A, Party B and the related party each holding one, which shall be equally authentic.
Article 21 When this Contract is signed, Party B has explained and interpreted in details all the terms and conditions of this Contract to Party A, and both Parties have no objection to the terms and conditions of this Contract. Both Parties have accurate understanding of the legal meaning of their corresponding rights and obligations, limitation of responsibilities or disclaimers.
Article 22 Both Parties agree and authorize Party B irrevocably to report relevant information to the financial credit information database established by the State. Such information shall include the name, registered address and other related information of this institution, the transaction records, credit information and bad information (including failure to perform obligations of this Contract, the institution’s performance of obligations and enforcement ruled or judged by the people’s court, and other relevant bad information prescribed by laws and regulations) generated during business activities and performance activities of this institution under this Contract.
This Contract is signed by Party A and Party B in Shenzhen .
Party A: Springpower Technology (Shenzhen) Co.,wd Ltd. (Seal) (Seal) | |
Legal Representative / Main Principal: Pan Dangyu (Seal) | |
Date: | |
Party B: CHINA MINSHENG BANKING CORP., LTD. SHENZHEN BRANCH (Seal) (Seal) | |
Legal Representative / Main Principal: Ou Yangyong (Signature) | |
(Or Authorized Agent) | (Signature or Seal) |
Date: |
Exhibit 10.25
Maximum Financing Contract
Huaxia Bank Co., Ltd.
Maximum Financing Contract
No.: SZ03 (R.Z.) 20170028
Party A: Springpower Technology (Shenzhen) Co., Ltd.
Domicile: Workshop Building A, Shunchao Industrial Zone, Renmin Road, Danhu Community, Guanlan Street, Bao’an District, Shenzhen City
Zip Code: 51800
Legal Representative: Pan Dangyu
Tel.: 0755-89686802
Fax: 0755-89666819
Basic Account Opening Bank: Bank of China Shenzhen Branch
Account No.: xxxxx
Party B: Huaxia Bank Co., Ltd. Shenzhen Great China Sub-branch
Domicile: East of First Floor, Great China International Exchange Square, Futian District, Shenzhen
Zip Code: 518000
Legal Representative / Main Principal: Xia Feng
Tel.: 0755-23997085
Fax: 0755-23997090
In accordance with relevant laws and regulations of China, Party A and Party B make and enter into this Contract upon unanimity through consultation between both parties following the principle of fairness.
Article 1 Maximum Financing Limit and Type
1.1 Within the valid period of the maximum financing limit agreed herein (hereinafter referred to as “the Valid Period of Limit”), the maximum financing limit Party A may apply Party B for use is:
Currency: RMB
Amount (in words): Fifty Million Yuan Only
(The amount of a foreign currency transaction shall be converted according to the selling price of foreign exchange listed by Party B on the date when the transaction occurs.)
This Contract shall not constitute Party B’s inevitable obligation of providing Party A with financing. Party B shall, under any circumstances, have the right to adjust the Valid Period of Limit and the maximum financing limit under this Contract.
1.2 The financing form under the maximum financing limit agreed herein shall include but not be limited to loan, acceptance of bill, discount of bill, trade financing, letter of guarantee or other credit business types accepted by Party B.
1.3 Within the Valid Period of Limit agreed herein, the specific business type, amount, usage period and purpose of the financing limit used by Party A shall be subject to the specific business contract under this Contract. Both parties shall handle relevant business according to the stipulations of the specific business contract.
The specific business contract may be a contract or an agreement signed by both parties, or other legal document submitted by Party A to Party B and accepted by Party B, for example, “application for opening of a L/C”.
Article 2 Valid Period of Limit
2.1 The Valid Period of Limit agreed in Article 1 of this Contract shall be one year from Oct 23, 2017 to Oct 23, 2018.
2.2 Party B has the right to review the use of the maximum financing limit under this Contract and adjust the aforesaid Valid Period of Limit.
Article 3 Guarantee
3.1 In order to ensure that the creditor’s rights produced under this Contract are repaid, mortgage, pledge, suretyship, or other one or several guarantees permitted by law may be adopted. The guarantee contract shall be made and entered into by and between the guarantor and Party B, separately.
3.2 When Party A and Party B conclude a specific business contract hereunder, Party B shall have the right to demand Party A to provide guarantee other than the guarantee specified herein.
Article 4 Use of Maximum Financing Limit
4.1 Each time when Party A uses a financing limit, Party A shall present a written application to Party B ten working days in advance, and Party B has the right to review. When Party B agrees through review, both parties shall conclude and sign a specific business contract separately.
4.2 Within the Valid Period of Limit, Party A may reapply for use of the financing limit released by means of payment, and the financing limit unused within the Valid Period of Limit shall be automatically lapsed upon expiration of the Valid Period.
4.3 Party B must apply for use of the financing limit within the Valid Period of Limit agreed in Article 2 herein. The date of signature of a specific business contract shall not be later than the deadline of the Valid Period of Limit. The date of payment of each loan or the date of draft of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee / issuance of a letter of guarantee for the release of goods shall not be later than the deadline of this period.
If Party B adjusts or Party A and Party B agree to extend the Valid Period of Limit upon unanimity through consultation between both parties, this deadline shall be the deadline after adjustment. The service life of each maximum financed capital shall be subject to the stipulation of the specific business contract and the expiry date of the performance period shall not be affected by the expiration of the Valid Period of Limit.
4.4 The expenses which should be charged under bills, letter of guarantee, international trade financing and other related business, the discount rate under discount of bills, and the interest rate and exchange rate which should be determined in inward and outward documentary bills shall be agreed by Party A and Party B in each specific business contract.
Article 5 Party A’s Representations and Warranties
Party A hereby makes the following representations and warranties to Party B:
5.1 Party A is a legal entity duly established and validly existing. Party A has the right to dispose the properties under its operation and management, do business for the purpose related to that specified in this Contract and the specific business contract, and sign and execute this Contract and the specific business contract.
5.2 To sign and execute this Contract and the specific business contract, Party A has obtained approvals from competent authorities, including superior competent department or the board of directors of the company and has obtained all necessary authorizations.
5.3 The signature and execution of this Contract and the specific business contract by Party A does not violate the stipulations or provisions binding upon Party A and Party A’s assets, including but not limited to any guarantee agreement between Party A and another party or the contents of guarantee commitments made to another party.
5.4 All documents and materials that Party A provides Party B shall be genuine, accurate, legitimate and effective.
5.5 Party A’s all behaviors and performances in connection with environment and social risks shall comply with statutory and regulatory requirements, and there is no major lawsuit connected with environment and social risks.
Article 6 Party A’s Rights and Obligations
6.1 During the execution period of this Contract and a specific business contract thereof, Party A shall, according to Party B’s requirements, provide coordination in inspection and timely provide, including but not limited to:
6.1.1 business license, organization code certificate, identity certification and necessary personal information of the legal representative, members and main principal of the board of directors, list of financial officers, business operation permit, tax registration certificate of pass of the taxation departments’ annual inspection, photocopies of the tax payment proof materials of taxation departments provided according to the year required by Party B, and loan certificate (card);
6.1.2 all opening banks, account number, and deposit and loan;
6.1.3 audited balance sheet, statement of profit and loss, statement of changes of owner’s equity, sales conditions, statement of cash flow, financial statements and notes and explanations;
6.1.4 production management planning, statistics statements, and engineering budget and settlement materials;
6.1.5 situations of all external guarantee (including guarantee for Party B’s any institution);
6.1.6 information of all affiliated enterprises and affiliated relations, information of affiliated transaction accounting for over ten percent of Party A’s net assets which have occurred and are going to occur, and information of mutual guarantee amongst group customers;
6.1.7 information of lawsuit, arbitration, administrative punishment and dispute over obligation with others, and criminal case, prosecution and punishment on members of the management.
6.2 Use of a financing limit by Party A shall comply with laws, this Contract and the specific business contract.
6.3 Party A shall notify Party B in written form thirty days prior to the following changes, including but not limited to contracting, lease, custody, reorganization of assets, reconstruction of debts, transformation of equity system, joint operation, business combination (or merger), division, paid transfer of property, joint investment (or cooperation), reduce of registered capital, or filing for winding-up, filing for dissolution (or cancellation), filing for reorganization, mediation and bankruptcy, or change of self system or legal status. Party A shall implement the liability of repayment of the debts under this Contract upon Party B’s written consent, or provide a new guarantee accepted by Party B in written form, or Party A shall not conduct the foregoing activities prior to full repayment of all debts under this Contract.
6.4 Party A shall notify Party B of the following changes in written form thirty days prior to occurrence of the changes that Party A is announced winding-up, is announced closed, is announced dissolved (cancelled), is filed reorganization or bankruptcy, or changes self system and legal status. Meanwhile, Party A shall take sufficient and effective actions to protect the creditor's rights of Party B.
6.5 Where there is any situation which is sufficient to endanger Party A’s normal operation or the safety of the creditor’s rights of Party B, Party A shall notify Party B in writing within three days. Meanwhile, Party A shall take sufficient and effective actions to protect the creditor's rights of Party B.
6.6 Without Party B’s consent, Party A shall not sell specific assets, prepay other long-term debts or provide a third party with extra guarantee for debts until Party A has repaid Party B the principal and interest of the amount of the specific business under this Contract.
6.7 Party A shall not conclude any contract with any a third party which damages Party B’s rights and interests under this Contract and a specific business contract hereof.
6.8 In the event that Party A’s legal representative, domicile, name or middle and senior management personnel have any significant change, Party A shall notify Party B in writing within seven days after this change.
6.9 Party A shall repay on time the principal and interest of the amount of the specific business under this Contract and pay the expenses payable on time.
6.10 If Party A uses a financing limit to handle international trade financing business (including packing loan, import and export bill purchase, opening of L/C, letter of guarantee, discount of bill and acceptance of bill of exchange), Party A shall ensure: when the business is conducted, the Uniform Customs and Practice for Documentary Credits (latest version) of the International Chamber of Commerce, the Uniform Rules for Collections (URC522) and other related international practices prevailing when this Contract is signed shall be strictly observed. Party B’s reputation and interest shall not be damaged due to any business dispute.
6.11 In the event that Party B realizes creditor’s rights through lawsuit, arbitration or other means due to Party A’s violation of this Contract and a specific business contract hereof, Party A shall bear the appraisal cost, evaluation cost, auction cost, legal cost, arbitration fee, notarization fee and attorney fee paid by Party B therefore, and other reasonable expenses of Party B for realizing creditor’s rights.
6.12 If Party A is a group customer, Party A shall:
6.12.1 provide Party B with relevant information and materials of the group company, including but not limited to list of members of the group customer, legal representative, actual controlled, registered address, registered capital, main business, equity structure, senior management personnel, financial status, items of major assets, guarantees and important lawsuits, and so on.
6.12.2 timely report to Party B in written form the affiliated transactions accounting for over ten percent of Party A’s net assets, including but not limited to affiliated relations amongst transaction parties, transaction items, transaction nature, transaction amount or relevant proportions and pricing policy of transaction.
6.13 Party A shall strengthen management of environment and social risks, and accept and coordinate Party B or a third party affirmed by Party B in supervision and inspection. At Party B’s request, Party A shall submit an environment and social risk report to Party B timely.
Article 7 Party B’s Rights and Obligations
7.1 Party B is entitled to, according to relevant management regulations and credit examination and approval procedures of Huaxia Bank, decide whether to conclude a specific business contract with Party A and check and supervise the situations of the specific business at any time.
7.2 If Party B agrees Party A to use a financing limit, the specific business contract concluded shall be timely executed.
7.3 Party B shall keep confidential the materials and information about Party A’s debt, financial status, production and operation provided by Party A, except otherwise prescribed by laws and regulations and regulatory policies.
Article 8 Management and Control of Post-Credit Risks
8.1 During the period when the maximum financed capital hereunder is used, to meet the needs for control of Party B’s risks, Party A shall ensure and continue to meet the requirements of the following financial indicators:
/ | . |
Where there is any stipulation in the specific business contract, the contents specified in the specific business contract shall prevail.
8.2 During the period when the maximum financed capital hereunder is used, to meet the needs for control of Party B’s risks, Party A shall ensure and continue to make business settlement according to the following stipulations:
Party B is the main settlement bank of Party A and Party A’s main
settlement business shall be handled through Party A’s account opened with Party B.
Party B is not the main settlement bank of Party A. Party A shall provide Party B with
the bank statements of the main settlement account or other relevant materials once every
/
month(s).
/
.
Article 9 Prepayment
9.1 During the execution process of this Contract, Party B shall have the right to ask Party A to prepay the financing limit used by Party A under the following circumstances:
9.1.l Party A provides false information or holds back important operational accounting facts;
9.1.2 without Party B’s consent, Party A changes the purpose of the financed capital or uses the financed capital for conducting any illegal or rule-breaking transaction;
9.1.3 Party A violates any other contract or agreement concluded with others, or Party A makes any commitment or warranty unilaterally, which constitutes serious breach of other debts;
9.1.4 the guarantee capacity of the guarantor hereunder becomes obviously insufficient, or the pledged or mortgaged property hereunder is expropriated or damaged or its value obviously declines, and Party A is unable to provide a new guarantee according to Party B’s requirements;
9.1.5 During the valid period of this Contract, Party A expressly indicates or indicates by its acts that Party A is unable to or fails to perform its obligations specified in this Contract or the specific business contract;
9.1.6 Party A transfers its assets, withdraws funds, evades debts or has any other behavior which damages Party B’s rights and interest;
9.1.7 Party A does not perform its commitments made in Article 5 herein or does not perform the obligations agreed in this Contract or a specific business contract;
9.1.8 Party A refuses Party B’s supervision and examination on Party A’s use of the credit funds and relevant operation and financial activities;
9.1.9 Party A uses a false contract with an affiliated party to discount or pledge on the basis of bill receivable and accounts receivable without real trade background to illegally withdraw Party B's financing;
9.1.10 Party A evades Party B’s obligatory right intentionally through affiliated transaction;
9.1.11 Party A’s operating mode, self system or legal status is changed, including but not limited to contracting, lease, custody, asset reorganization, debt reconstruction, reform of shareholding system, joint operation, consolidation (merger), division, paid transfer of property, joint venture (cooperation), reduce of registered capital, or applying for winding-up, applying for dissolution (or cancellation), applying for reforming, reconciliation and bankruptcy. Party A has not obtained Party A’s written consent, hasn’t implemented the liability of repayment of the debts under a specific business contract of this Contract or hasn’t provided a new guarantee accepted by Party B;
9.1.12 There is any serious crisis of the overall credit status, operating conditions and financial status of the group customer of Party A, which causes significant threat to the safety of Party B’s loan;
9.1.13 Party A is unable to or is likely unable to repay the due debt because Party A sells, transfers or disposes by other means any material assets or Party A’s operation and financial status becomes worse; or Party A is involved in any significant economic lawsuit or arbitration and other legal dispute, or is involved in any significant administrative punishment, which serious affects and threatens the realization of the creditor’s rights of Party B;
9.1.14 Party A goes out of business, is dissolved, stops business or is ordered to close, or its business license is revoked or cancelled;
9.1.15 Party A violates any other obligation agreed in this Contract, or the Guarantor hereunder violates any obligation agreed in the guarantee contract, that Party B thinks sufficient to affect realization of its creditor’s rights;
9.1.16 Party A causes a liability accident or a significant environment and social risk incident due to violation of relevant laws, regulations, regulatory provisions or industrial standards for food safety, work safety, environmental protection and management of environment and social risks, which has affected or may affect the performance of obligations under this Contract or a specific business contract.
9.2 If Party A applies for prepayment, Party A shall present a written application to Party B ten working days in advance and make treatment according to the following methods upon Party B’s written consent:
Party B shall calculate and collect interest according to the number of days
of actual occupation of the loan and the loan interest rate agreed in the specific business contract under this Contract;
In addition to the interest calculated and collected according to the number
of days of actual occupation of the loan and the loan interest rate agreed in the specific business contract under this
Contract, Party B shall charge
/
% of the prepayment amount as compensation. However, the
maximum compensation shall not exceed the result of: repayment amount × loan interest rate agreed in the specific
business contract / 360 × number f days advanced.
Article 10 Effectiveness, Transfer and Change of Contract
10.1 This Contract shall come into force as of the date of signature of both parties. However, Party B shall have no obligation for allowing Party A to use any financing limit before Party A and its guarantor conclude a guarantee contract according to Party B’s requirements and complete the procedures agreed in the guarantee contract and the mortgage /pledge right becomes effective by law.
10.2 As agreed by Party A, after effectiveness of this Contract, Party B may transfer to a third party all or part of the debts under this Contract and the specific business contract.
10.3 If Party A transfers to a third party all or part of the debts under this Contract and the specific business contract after effectiveness of this Contract, Party A shall submit to Party B the written documents that the guarantor agrees transfer of successive guarantee obligation or provide a new guarantee, and obtain Party B’s written consent.
10.4 Party A and Party B shall not change this Contract without authorization after effectiveness of this Contract. Where necessary, Party A and Party B shall reach a written change agreement.
Article 11 Confidentiality
Party A or Party B shall bear the obligation of confidentiality for the other party’s business secret, contractual clauses and other information related to interest acquired during the signature and execution processes of this Contract, but shall not disclose the aforesaid information to a third party without the other party’s consent, except otherwise prescribed by laws, regulations and regulatory policies.
Article 12 Governing Laws and Dispute Settlement
12.1 This Contract shall be governed by laws of the People's Republic of China.
12.2 Any and all disputes arising from the execution of this Contract and/or a specific business contract shall be settled through consutlation between Party A and Party B. Where consutlation fails, either party may make settlemnt acording to the following method, except otherwise agreed in the specific business contract for dispute settlement under this Contract:
To bring a case to the local people’s court at the domicile of Party B;
To apply
/
Arbitration Committee for arbitration.
Article 13 Notice and Service
During the valid period of this Contract, if Party A changes its information first given in this Contract without notifying Party B in written form, including name of Party A’s legal person, legal representative, domicile and telephone number, all documents that Party B sends to Party A according to Party A’s information given in this Contract shall be deemed as having been served.
Article 14 Supplementary Provisions
14.1 The specific business contracts made and entered into by and between Party A and Party B for each specific maximum financing business on the basis of this Contract shall be a part of this Contract and constitute an entire contract. in case of discrepancy between a specific business contract and this Contract, the specific business contract shall prevail.
14.2 Party A authorizes Party B to, in accordance with relevant laws and regulations, or other regulatory documents or requirements of financial regulators, provide the relevant information of the Contract and other relevant information for the credit information basic database of the People’s Bank of China or other credit database established by law for the qualified institutions or individuals to search and use. Party A also authorizes Party B to, for the purpose of the conclusion and performance of the Contract, search Party B’s relevant information through the credit information basic database of the People’s Bank of China or other credit database established by law.
14.3 If selection is made in □ under this Contract, this clause shall apply if √ is ticked in □ but shall not apply if × is given in □.
14.4 This Contract shall be provided for Party A holding one original, Party B holding two originals and the Guarantor holding one original, which shall be equally authentic.
14.5 Other provisions agreed by both parties:
/
14.6 Party B has take reasonable measures to remind Party A to pay attention to the clauses of exempting or restricting Party B’s responsibilities and, according to Party A’s requirements, has given full explanation of relevant clauses. Party A and Party B have no objection to the understanding of the contents of all clauses of this Contract.
(The remainder of this page is intentionally left blank.)
Page of signature (the remainder of this page is intentionally left blank.)
Party A: (Seal) | |
Springpower Technology (Shenzhen) Co., Ltd. (Seal) | |
Legal Representative: | |
(Or Authorized Agent): | (Signature) |
Party B: (Seal) | |
Huaxia Bank Co., Ltd. Shenzhen Great China Sub-branch (Seal) |
Legal Representative / Main Principal: | |
(Or Authorized Agent) | (Signature or Seal) |
Exhibit 10.25(a)
Personal Maximum Guarantee Contract
(2014)
Huaxia Bank Co., Ltd.
Personal Maximum Guarantee Contract
No.: SZ03 (G.B.) 20170028-14
Party A (Guarantor): Pan Dangyu
Certificate Type and No.: Residence Identity Card: *****
Domiciles: Room 2402, Unit 3, Bldg. 3, Phase II, Dongfang Qinyuan, 12 th Zone, Longgang Central City, Longgang District, Shenzhen
Home Tel.: 0755-89686802
Zip Code: 518000
Work Unit: Springpower Technology (Shenzhen) Co., Ltd.
Company Tel.: 0755-89686802
Mobile: ***
Party B (Creditor): Huaxia Bank Co., Ltd. Shenzhen Great China Sub-branch
Domicile: East of First Floor, Great China International Exchange Square, Futian District, Shenzhen
Zip Code: 518000
Legal Representative / Main Principal: Xia Feng
Tel.: 0755-23997085
Fax: 0755-23997090
In accordance with the Guarantee Law of the People's Republic of China and other relevant laws and regulations, whereas Party B will have many creditor’s rights continuously with the Debtor Springpower Technology (Shenzhen) Co., Ltd. (hereinafter referred to as “the Debtor of the Main Contract) on the basis of the Main Contract during the period agreed herein, and Party A is willing to provide Party B with suretyship guaranty for the aforesaid creditor’s rights (hereinafter referred to as “the Principal Creditor’s Rights”) to the extent of the total amount of the creditor’s rights, IN WITNESS WHEREOF, Party A and Party B make and enter into this Contract upon unanimity through consultation.
Part 1
Chapter 1 Type, Maximum Amount and Period of the Principal Creditor’s Rights Guaranteed
Article 1 The Main Contract of this Contract is selected as follows:
The
Maximum Financing Contract
of
SZ03 (R.Z.) 20170028
made and entered into by and between Party B and the
Debtor of the Main Contract; the contract and the specific business contract thereunder shall constitute the Main Contract of this
Contract;
/
continuously made and entered into by and between Party B and the Debtor of the Main Contract during the period of Principal
Creditor’s Rights specified in Article 3 herein shall constitute the Main Contract of this Contract.
Article 2 The maximum amount of the creditor’s rights guaranteed hereunder is: Currency RMB , amount (in words) Fifty Million Yuan Only (The amount of a foreign currency transaction shall be converted according to the selling price of foreign exchange listed by Party B on the date when the transaction occurs.).
Article 3 The period of the principal credit’s right guaranteed hereunder shall be from Oct 23, 2017 to Oct 23, 2018 .
Chapter 2 Dispute Settlement
Article 4 Any and all disputes arising from the execution of this Contract between Party A and Party B shall be settled through consultation; where consultation fails, both parties agree to settle the dispute according to the following method:
To bring a case to the local people’s court
at the domicile of Party B
;
To apply
/
Arbitration Committee for arbitration.
Article 5 If the method selected above for dispute settlement is different from the method for dispute settlement under the Main Contract, the method for dispute settlement selected under the Main Contract shall be applied.
Chapter 3 Miscellaneous
Article 6 Other provisions agreed by both parties
/
Article 7 This Contract shall be provided for Party A holding one original, Party B holding two originals and the Debtor holding one original, which shall be equally authentic.
Part 2
Chapter 1 Type, Maximum Amount and Period of the Principal Creditor’s Rights Guaranteed
Article 8 The business type of the Principal Creditor’s Rights secured by Party A shall be the same as that agreed in the Main Contract.
Article 9 The term “maximum amount of creditor’s rights” referred to in Article 2 herein means the balance of the principal of the maximum Principal Creditor’s Rights, specified as follows:
9.1 The amount of all the outstanding principals used by the Debtor of the Main Contract at any time (for example, if the business under the Main Contract is a business of letter of credit, bank acceptance bill, letter of guarantee or letter of guarantee for the release of goods, this amount shall be the accrued but unpaid business balance) shall not exceed the limit specified in the preceding paragraph. However, the Debtor of the Main Contract may apply for recycling the principals paid to the extent of this limit;
9.2 The maximum amount of creditor’s rights shall be the maximum amount of the principals of the Principal Creditor’s Rights. If the principal does not exceed this limit, Party A is willing to bear guarantee liability for all the accounts payable arising therefrom and within the scope specified in Article 11, including interest, default interest and expenses.
Article 10 Provisions agreed in Article 3 herein shall have the following meanings:
10.1 If the business specified in the Main Contract is a loan business, the date of release of each loan shall not be later than the expiry date of this period.
10.2 If the business specified in the Main Contract is a business of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods), the date of draft of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods) shall not be later than the expiry date of this period;
10.3 The expiry date of each creditor’s right shall be subject to the date agreed in the specific business contract and shall not be affected by the expiration of this period.
Chapter 2 Scope of Suretyship Guaranty
Article 11 The scope of suretyship guaranty of Party A includes the principal, interest, default interest and compound interest of the creditor’s right under the Main Contract, penalty, damages, appraisal cost, evaluation cost, auction cost, legal cost, arbitration fee, notarization fee and attorney fee, and other expenses of Party B for realizing the claims.
Article 12 All expenses except principal within the scope specified in the preceding paragraph shall be included in the scope of guarantee liability bearable by Party A but shall not be included in the maximum amount of creditor’s rights guaranteed hereunder.
Chapter 3 Determination and Suretyship Modes of the Creditor’s Rights Guaranteed
Article 13 The creditor’s rights guaranteed under this Contract shall be determined under any one of the following circumstances:
13.1 the period of the Principal Creditor’s Rights specified in Article 3 of this Contract expires;
13.2 the Creditor under the Main Contract announces acceleration of all debts under the Main Contract by law or according to relevant stipulations of the Main Contract; or
13.3 other circumstances for determining the creditor’s rights guaranteed by law.
Article 14 When a creditor’s right guaranteed under this Contract is determined, the following shall become effective:
14.1 When the creditor’s rights guaranteed under this Contract are determined, the outstanding creditor’s rights under the Main Contract shall be included in the scope of the creditor’s rights guaranteed no matter whether the performance period of the creditor’s rights has expired or not or there is any other additional condition.
14.2 When the creditor's rights guaranteed under this Contract are determined, all funds other than the principals specified in Article 11 of this Contract shall be included in the scope of the creditor’s rights guaranteed no matter whether the funds have been occurred or not;
Article 15 Suretyship of joint and several liability is adopted as the method of guarantee by Party A. From the date when the creditor’s rights guaranteed under this Contract are determined to the date of full repayment of the creditor’s rights guaranteed, if the Debtor of the Main Contract fails to perform the obligation of repayment of debts, Party B shall have the right to directly claim Party A for compensation and Party A shall repay Party B relevant debts immediately.
Article 16 If, besides the guaranty method agreed in this Contract, there is any other guarantee (including but not limited to the guarantee that the Debtor of the Main Contract provides Party B), Party B shall have the right to firstly exercise the rights under this Contract and request Party A to bear joint and several suretyship liability. Party A’s suretyship liability for Party B shall not be affected by any other guarantee. Meanwhile, Party A’s suretyship liability may not be premised at Party B’s filing of any right claim against any other guarantor or Party B’s execution of lawsuit / arbitration / enforcement. In the event that Party B waives or changes for any reason the property security provided by the Debtor of the Main Contractor, or changes the security sequence, resulting in loss or reduction of its priority to gain compensation under the property security mentioned above, Party A agrees that Party A’s suretyship liability hereunder may not be exempted or reduced.
Article 17 If Party A provides guarantee for part creditor’s rights under the Main Contract, any compensation for the creditor’s rights under the Main Contract shall not reduce or exempt Party A’s guarantee liability. Party A shall also bear guarantee liability for the outstanding amount under the Main Contract to the extent of the amount guaranteed by Party A.
Article 18 If the Debtor under the Main Contract makes prepayment or changes the interest rate through consultation with Party B, Party A shall continue to bear guarantee liability for Party B's creditor’s rights after change.
Chapter 4 Period of Suretyship
Article 19 The period of suretyship that Party A bears suretyship liability shall be two years from the date determined according to the following method:
19.1 If the expiry date of the performance period of a debt is earlier than or equals to the date of determination of the creditor’s rights guaranteed, the period of suretyship that Party A bears suretyship liability for the debt shall be from the date of determination of the creditor’s rights guaranteed;
19.2 If the expiry date of the performance period of a debt is later than the date of determination of the creditor’s right guaranteed, the period of suretyship that Party A bears suretyship liability for the debt shall be from the expiry date of the performance period of this debt.
Article 20 The term “expiry date of the performance period of a debt” indicated in the preceding paragraph includes the expiry date of the debt when the Debtor of the Main Contract repays the debt by installments, and also includes the expiry date of acceleration announced by the Creditor according to the stipulations of the Main Contract.
Article 21 If the business under the Main Contract is a business of letter of credit, bank acceptance bill, letter of guarantee or letter of guarantee for the release of goods, the date of advancement shall be deemed as the expiry date of the performance period of the debt.
Chapter 5 Party A’s Rights and Obligations
Article 22 Party A is aware of and agrees all terms and conditions of the Main Contract. Party A is willing to provide suretyship for the Debtor of the Main Contract and perform the obligation of repayment on behalf according to the stipulations of this Contract.
Article 23 During the execution period of this Contract, Party A shall, according to Party B’s requirements, faithfully provide the certifications of his personal career, incomes, expenditures, liabilities, guarantees and economic disputes with others.
Article 24 Party A ensures that the personal information and others’ relevant information (including the personal basic information, business information and other relevant information of Party A and others that Party B cannot obtain from public channels) provided for Party B are genuine, accurate, effective and complete, and Party A has obtained others’ consent.
Article 25 In case of change of Party A’s personal or family economic incomes, personal identity relations or legal status, or in case of Party A’s involvement in litigation, arbitration or other events likely to affect Party A’s guarantee ability during the execution period of this Contract, Party A shall notify Party B in writing within three days.
Article 26 In case of change of Party A’s name, domicile and contact method during the execution period of this Contract, Party A shall notify Party B in writing within seven days.
Article 27 Party A ensures not to provide a third party with any other form of guarantee exceeding his guarantee ability during the valid period of this Contract.
Article 28 When Party B and the Debtor of the Main Contract concludes and signs a specific business contract (or agreement), Party A may not be notified.
Article 29 If the loan under the Main Contract is used for borrowing or repaying, Party A is willing to bear suretyship liability.
Chapter 6 Party B’s Rights and Obligations
Article 30 Party B has the right to ask Party A to provide materials reflecting Party A’s credit situations at any time.
Article 31 If Party A does not perform his liability under this Contract, Party B shall have the right to deduct principal, interest, default interest, compound interest and other debts directly from Party A’s any account opened with any banking institution of Huaxia Bank Co., Ltd. (except that deduction cannot be made in accordance with laws and regulations). If Party B makes deduction from a fixed deposit account of Party A, interest shall be calculated according to the provisions for early withdrawal in the Regulations on Management of Savings ; after repayment of the loan principal and interest, the remaining balance shall be refunded to Party A. Loss of interest arising therefrom shall be borne by Party A, and the difference after deduction shall be repaid by Party A. If the currency of deduction is different from the currency under this Contract, translation shall be made according to the list price announced by Party B on the date of deduction.
Article 32 Party B has the obligation of keeping confidential the information provided by Party A. Party B has the right to reserve for internal use the information provided by Party A within the time limit prescribed by laws, regulations, regulatory provisions and competent authorities (Party B has the right to destroy the information when this time limit expires); Party B has the right to provide the information provided by Party A for credit institutions or provide Party A’s information according to laws and regulations, and compulsory orders of judicial authorities; Party B has the right to disclose the information provided by Party A to Party B’s agent for the purpose of execution of this Contract, and obtain commitment to confidentiality from the agent.
Chapter 7 Liability for Breach of Contract
Article 33 When this Contract becomes effective, Party A and Party B shall perform the obligations specified in this Contract. Any party which fails to wholly or partly perform its obligations specified herein shall undertake relevant liability for breach of contract and make compensation for losses caused to the other party.
Chapter 8 Effectiveness of Contract
Article 34 This Contract shall enter into force as of the date of signature of both parties.
Article 35 The validity of this Contract shall be independent of the Main Contract and may not be affected by the invalidity of the Main Contract. If the Main Contract is confirmed as invalid, Party A shall assume joint and several suretyship liability for the debts arising from the Debtor’s return of property or compensation for losses.
Chapter 9 Transfer, Change and Cancellation of Contract
Article 36 Party A or Party B shall not change or cancel this Contract without permission after the effectiveness of this Contract.
Article 37 Party B may transfer the Principal Creditor’s Rights to a third person within the valid period of this Contract without obtaining Party A’s consent, but Party B shall notify Party A, and Party A shall continue to bear joint and several suretyship liability within the original scope of suretyship.
Article 38 If the type of the Principal Creditor’s Rights hereunder is L/C advanced payment, as acknowledged by Party A, when the L/C issuing applicant and Party B agree to change the L/C and the amount under the L/C after change (including but not limited to interest, penalty, compensation and other relevant expenses) does not exceed the maximum amount of creditor’s rights guaranteed hereunder. Regardless of the change of the L/C amount and other clauses, the aforesaid change shall be deemed as having been agreed by Party A in advance. Meanwhile, this Guarantee Contract shall remain effective and Party A shall continue to bear joint and several suretyship liability.
Chapter 10 Supplementary Provisions
Article 39 If Party A does not notify Party B in writing of the change of Party A’s name, domicile or contact way during the valid period of this Contract, Party B's all documents sent to Party A according to the information given in this Contract shall be deemed as having been served.
Article 40 If selection is made in □ under this Contract, this clause shall apply if √ is ticked in □ but shall not apply if × is given in □.
Article 41 This Contract shall be provided for Party A holding one original, Party B holding two originals and the Debtor holding one original, which shall be equally authentic.
Article 42 Annex(es) to this Contract shall be deemed as an integral part of this Contract and have the same equal legal force as this Contract.
(The remainder of this page is intentionally left blank.)
Page of signature (the remainder of this page is intentionally left blank.)
Party A
(Or Authorized Agent): | (Signature) |
Party B:
Huaxia Bank Co., Ltd. Great China Sub-branch (Seal)
Legal Representative:
(Or Authorized Agent): | (Signature) |
Exhibit 10.25(b)
Personal Maximum Guarantee Contract
(2014)
Huaxia Bank Co., Ltd.
Personal Maximum Guarantee Contract
No.: SZ03 (G.B.) 20170028-15
Party A (Guarantor): Yin Zhoutao
Certificate Type and No.: Residence Identity Card: *****
Domiciles: Room 2402, Unit 3, Bldg. 3, Phase II, Dongfang Qinyuan, 12 th Zone, Longgang Central City, Longgang District, Shenzhen
Home Tel.: 0755-89686802
Zip Code: 518000
Work Unit: Springpower Technology (Shenzhen) Co., Ltd.
Company Tel.: 0755-89686802
Mobile: ***
Party B (Creditor): Huaxia Bank Co., Ltd. Shenzhen Great China Sub-branch
Domicile: East of First Floor, Great China International Exchange Square, Futian District, Shenzhen
Zip Code: 518000
Legal Representative / Main Principal: Xia Feng
Tel.: 0755-23997085
Fax: 0755-23997090
In accordance with the Guarantee Law of the People's Republic of China and other relevant laws and regulations, whereas Party B will have many creditor’s rights continuously with the Debtor Springpower Technology (Shenzhen) Co., Ltd. (hereinafter referred to as “the Debtor of the Main Contract) on the basis of the Main Contract during the period agreed herein, and Party A is willing to provide Party B with suretyship guaranty for the aforesaid creditor’s rights (hereinafter referred to as “the Principal Creditor’s Rights”) to the extent of the total amount of the creditor’s rights, IN WITNESS WHEREOF, Party A and Party B make and enter into this Contract upon unanimity through consultation.
Part 1
Chapter 1 Type, Maximum Amount and Period of the Principal Creditor’s Rights Guaranteed
Article 1 The Main Contract of this Contract is selected as follows:
The
Maximum Financing Contract
of
SZ03 (R.Z.) 20170028
made and entered into by and between Party B and the
Debtor of the Main Contract; the contract and the specific business contract thereunder shall constitute the Main Contract of this
Contract;
/
continuously made and entered into by and between Party B and the Debtor of the Main Contract during the period of Principal
Creditor’s Rights specified in Article 3 herein shall constitute the Main Contract of this Contract.
Article 2 The maximum amount of the creditor’s rights guaranteed hereunder is: Currency RMB , amount (in words) Fifty Million Yuan Only (The amount of a foreign currency transaction shall be converted according to the selling price of foreign exchange listed by Party B on the date when the transaction occurs.).
Article 3 The period of the principal credit’s right guaranteed hereunder shall be from Oct 23, 2017 to Oct 23, 2018 .
Chapter 2 Dispute Settlement
Article 4 Any and all disputes arising from the execution of this Contract between Party A and Party B shall be settled through consultation; where consultation fails, both parties agree to settle the dispute according to the following method:
To bring a case to the local people’s court
at the domicile of Party B
;
To apply
/
Arbitration Committee for arbitration.
Article 5 If the method selected above for dispute settlement is different from the method for dispute settlement under the Main Contract, the method for dispute settlement selected under the Main Contract shall be applied.
Chapter 3 Miscellaneous
Article 6 Other provisions agreed by both parties
/
Article 7 This Contract shall be provided for Party A holding one original, Party B holding two originals and the Debtor holding one original, which shall be equally authentic.
Part 2
Chapter 1 Type, Maximum Amount and Period of the Principal Creditor’s Rights Guaranteed
Article 8 The business type of the Principal Creditor’s Rights secured by Party A shall be the same as that agreed in the Main Contract.
Article 9 The term “maximum amount of creditor’s rights” referred to in Article 2 herein means the balance of the principal of the maximum Principal Creditor’s Rights, specified as follows:
9.1 The amount of all the outstanding principals used by the Debtor of the Main Contract at any time (for example, if the business under the Main Contract is a business of letter of credit, bank acceptance bill, letter of guarantee or letter of guarantee for the release of goods, this amount shall be the accrued but unpaid business balance) shall not exceed the limit specified in the preceding paragraph. However, the Debtor of the Main Contract may apply for recycling the principals paid to the extent of this limit;
9.2 The maximum amount of creditor’s rights shall be the maximum amount of the principals of the Principal Creditor’s Rights. If the principal does not exceed this limit, Party A is willing to bear guarantee liability for all the accounts payable arising therefrom and within the scope specified in Article 11, including interest, default interest and expenses.
Article 10 Provisions agreed in Article 3 herein shall have the following meanings:
10.1 If the business specified in the Main Contract is a loan business, the date of release of each loan shall not be later than the expiry date of this period.
10.2 If the business specified in the Main Contract is a business of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods), the date of draft of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods) shall not be later than the expiry date of this period;
10.3 The expiry date of each creditor’s right shall be subject to the date agreed in the specific business contract and shall not be affected by the expiration of this period.
Chapter 2 Scope of Suretyship Guaranty
Article 11 The scope of suretyship guaranty of Party A includes the principal, interest, default interest and compound interest of the creditor’s right under the Main Contract, penalty, damages, appraisal cost, evaluation cost, auction cost, legal cost, arbitration fee, notarization fee and attorney fee, and other expenses of Party B for realizing the claims.
Article 12 All expenses except principal within the scope specified in the preceding paragraph shall be included in the scope of guarantee liability bearable by Party A but shall not be included in the maximum amount of creditor’s rights guaranteed hereunder.
Chapter 3 Determination and Suretyship Modes of the Creditor’s Rights Guaranteed
Article 13 The creditor’s rights guaranteed under this Contract shall be determined under any one of the following circumstances:
13.1 the period of the Principal Creditor’s Rights specified in Article 3 of this Contract expires;
13.2 the Creditor under the Main Contract announces acceleration of all debts under the Main Contract by law or according to relevant stipulations of the Main Contract; or
13.3 other circumstances for determining the creditor’s rights guaranteed by law.
Article 14 When a creditor’s right guaranteed under this Contract is determined, the following shall become effective:
14.1 When the creditor’s rights guaranteed under this Contract are determined, the outstanding creditor’s rights under the Main Contract shall be included in the scope of the creditor’s rights guaranteed no matter whether the performance period of the creditor’s rights has expired or not or there is any other additional condition.
14.2 When the creditor's rights guaranteed under this Contract are determined, all funds other than the principals specified in Article 11 of this Contract shall be included in the scope of the creditor’s rights guaranteed no matter whether the funds have been occurred or not;
Article 15 Suretyship of joint and several liability is adopted as the method of guarantee by Party A. From the date when the creditor’s rights guaranteed under this Contract are determined to the date of full repayment of the creditor’s rights guaranteed, if the Debtor of the Main Contract fails to perform the obligation of repayment of debts, Party B shall have the right to directly claim Party A for compensation and Party A shall repay Party B relevant debts immediately.
Article 16 If, besides the guaranty method agreed in this Contract, there is any other guarantee (including but not limited to the guarantee that the Debtor of the Main Contract provides Party B), Party B shall have the right to firstly exercise the rights under this Contract and request Party A to bear joint and several suretyship liability. Party A’s suretyship liability for Party B shall not be affected by any other guarantee. Meanwhile, Party A’s suretyship liability may not be premised at Party B’s filing of any right claim against any other guarantor or Party B’s execution of lawsuit / arbitration / enforcement. In the event that Party B waives or changes for any reason the property security provided by the Debtor of the Main Contractor, or changes the security sequence, resulting in loss or reduction of its priority to gain compensation under the property security mentioned above, Party A agrees that Party A’s suretyship liability hereunder may not be exempted or reduced.
Article 17 If Party A provides guarantee for part creditor’s rights under the Main Contract, any compensation for the creditor’s rights under the Main Contract shall not reduce or exempt Party A’s guarantee liability. Party A shall also bear guarantee liability for the outstanding amount under the Main Contract to the extent of the amount guaranteed by Party A.
Article 18 If the Debtor under the Main Contract makes prepayment or changes the interest rate through consultation with Party B, Party A shall continue to bear guarantee liability for Party B's creditor’s rights after change.
Chapter 4 Period of Suretyship
Article 19 The period of suretyship that Party A bears suretyship liability shall be two years from the date determined according to the following method:
19.1 If the expiry date of the performance period of a debt is earlier than or equals to the date of determination of the creditor’s rights guaranteed, the period of suretyship that Party A bears suretyship liability for the debt shall be from the date of determination of the creditor’s rights guaranteed;
19.2 If the expiry date of the performance period of a debt is later than the date of determination of the creditor’s right guaranteed, the period of suretyship that Party A bears suretyship liability for the debt shall be from the expiry date of the performance period of this debt.
Article 20 The term “expiry date of the performance period of a debt” indicated in the preceding paragraph includes the expiry date of the debt when the Debtor of the Main Contract repays the debt by installments, and also includes the expiry date of acceleration announced by the Creditor according to the stipulations of the Main Contract.
Article 21 If the business under the Main Contract is a business of letter of credit, bank acceptance bill, letter of guarantee or letter of guarantee for the release of goods, the date of advancement shall be deemed as the expiry date of the performance period of the debt.
Chapter 5 Party A’s Rights and Obligations
Article 22 Party A is aware of and agrees all terms and conditions of the Main Contract. Party A is willing to provide suretyship for the Debtor of the Main Contract and perform the obligation of repayment on behalf according to the stipulations of this Contract.
Article 23 During the execution period of this Contract, Party A shall, according to Party B’s requirements, faithfully provide the certifications of his personal career, incomes, expenditures, liabilities, guarantees and economic disputes with others.
Article 24 Party A ensures that the personal information and others’ relevant information (including the personal basic information, business information and other relevant information of Party A and others that Party B cannot obtain from public channels) provided for Party B are genuine, accurate, effective and complete, and Party A has obtained others’ consent.
Article 25 In case of change of Party A’s personal or family economic incomes, personal identity relations or legal status, or in case of Party A’s involvement in litigation, arbitration or other events likely to affect Party A’s guarantee ability during the execution period of this Contract, Party A shall notify Party B in writing within three days.
Article 26 In case of change of Party A’s name, domicile and contact method during the execution period of this Contract, Party A shall notify Party B in writing within seven days.
Article 27 Party A ensures not to provide a third party with any other form of guarantee exceeding his guarantee ability during the valid period of this Contract.
Article 28 When Party B and the Debtor of the Main Contract concludes and signs a specific business contract (or agreement), Party A may not be notified.
Article 29 If the loan under the Main Contract is used for borrowing or repaying, Party A is willing to bear suretyship liability.
Chapter 6 Party B’s Rights and Obligations
Article 30 Party B has the right to ask Party A to provide materials reflecting Party A’s credit situations at any time.
Article 31 If Party A does not perform his liability under this Contract, Party B shall have the right to deduct principal, interest, default interest, compound interest and other debts directly from Party A’s any account opened with any banking institution of Huaxia Bank Co., Ltd. (except that deduction cannot be made in accordance with laws and regulations). If Party B makes deduction from a fixed deposit account of Party A, interest shall be calculated according to the provisions for early withdrawal in the Regulations on Management of Savings ; after repayment of the loan principal and interest, the remaining balance shall be refunded to Party A. Loss of interest arising therefrom shall be borne by Party A, and the difference after deduction shall be repaid by Party A. If the currency of deduction is different from the currency under this Contract, translation shall be made according to the list price announced by Party B on the date of deduction.
Article 32 Party B has the obligation of keeping confidential the information provided by Party A. Party B has the right to reserve for internal use the information provided by Party A within the time limit prescribed by laws, regulations, regulatory provisions and competent authorities (Party B has the right to destroy the information when this time limit expires); Party B has the right to provide the information provided by Party A for credit institutions or provide Party A’s information according to laws and regulations, and compulsory orders of judicial authorities; Party B has the right to disclose the information provided by Party A to Party B’s agent for the purpose of execution of this Contract, and obtain commitment to confidentiality from the agent.
Chapter 7 Liability for Breach of Contract
Article 33 When this Contract becomes effective, Party A and Party B shall perform the obligations specified in this Contract. Any party which fails to wholly or partly perform its obligations specified herein shall undertake relevant liability for breach of contract and make compensation for losses caused to the other party.
Chapter 8 Effectiveness of Contract
Article 34 This Contract shall enter into force as of the date of signature of both parties.
Article 35 The validity of this Contract shall be independent of the Main Contract and may not be affected by the invalidity of the Main Contract. If the Main Contract is confirmed as invalid, Party A shall assume joint and several suretyship liability for the debts arising from the Debtor’s return of property or compensation for losses.
Chapter 9 Transfer, Change and Cancellation of Contract
Article 36 Party A or Party B shall not change or cancel this Contract without permission after the effectiveness of this Contract.
Article 37 Party B may transfer the Principal Creditor’s Rights to a third person within the valid period of this Contract without obtaining Party A’s consent, but Party B shall notify Party A, and Party A shall continue to bear joint and several suretyship liability within the original scope of suretyship.
Article 38 If the type of the Principal Creditor’s Rights hereunder is L/C advanced payment, as acknowledged by Party A, when the L/C issuing applicant and Party B agree to change the L/C and the amount under the L/C after change (including but not limited to interest, penalty, compensation and other relevant expenses) does not exceed the maximum amount of creditor’s rights guaranteed hereunder. Regardless of the change of the L/C amount and other clauses, the aforesaid change shall be deemed as having been agreed by Party A in advance. Meanwhile, this Guarantee Contract shall remain effective and Party A shall continue to bear joint and several suretyship liability.
Chapter 10 Supplementary Provisions
Article 39 If Party A does not notify Party B in writing of the change of Party A’s name, domicile or contact way during the valid period of this Contract, Party B's all documents sent to Party A according to the information given in this Contract shall be deemed as having been served.
Article 40 If selection is made in □ under this Contract, this clause shall apply if √ is ticked in □ but shall not apply if × is given in □.
Article 41 This Contract shall be provided for Party A holding one original, Party B holding two originals and the Debtor holding one original, which shall be equally authentic.
Article 42 Annex(es) to this Contract shall be deemed as an integral part of this Contract and have the same equal legal force as this Contract.
(The remainder of this page is intentionally left blank.)
Page of signature (the remainder of this page is intentionally left blank.) | |
Party A | |
(Or Authorized Agent): | (Signature) |
Party B: | |
Huaxia Bank Co., Ltd. Great China Sub-branch (Seal) | |
Legal Representative: | |
(Or Authorized Agent): | (Signature) |
Exhibit 10.25(c)
Maximum Guarantee Contract
Huaxia Bank Co., Ltd.
Maximum Guarantee Contract
No.: SZ03 (G.B.) 20170028-12
Party A (Guarantor): Huizhou Highpower Technology Co., Ltd.
Domicile: Xinhu, industry zone, Maan town, Huicheng District , Huizhou
Zip Code: 516000
Legal Representative: Pan Dangyu
Tel.: 0752-5807997
Fax: 0752-5807997
Basic Account Opening Bank: Bank of China Huizhou Branch
Account No.: ***
Party B: Huaxia Bank Co., Ltd. Shenzhen Great China Sub-branch
Domicile: East of First Floor, Great China International Exchange Square, Futian District, Shenzhen
Zip Code: 518000
Legal Representative / Main Principal: Xia Feng
Tel.: 0755-23997085
Fax: 0755-23997090
In accordance with the Guarantee Law of the People's Republic of China and other relevant laws and regulations, whereas Party B will have many creditor’s rights continuously with the Debtor Springpower Technology (Shenzhen) Co., Ltd. (hereinafter referred to as “the Debtor of the Main Contract) on the basis of the Main Contract during the period agreed herein, and Party A is willing to provide Party B with suretyship guaranty for the aforesaid creditor’s rights (hereinafter referred to as “the Principal Creditor’s Rights”) to the extent of the total amount of the creditor’s rights, IN WITNESS WHEREOF, Party A and Party B make and enter into this Contract upon unanimity through consultation.
Article 1 Type, Maximum Amount and Period of the Principal Creditor’s Rights Guaranteed
1.1 The Main Contract of this Contract is selected as follows:
The
Maximum Financing Contract
of
SZ03 (R.Z.) 20170028
made and entered into by and between Party B and the
Debtor of the Main Contract; the contract and the specific business contract thereunder shall constitute the Main Contract of this
Contract;
/
continuously made and entered into by and between Party B and the Debtor of the Main Contract during the period of Principal
Creditor’s Rights specified in Article 1.4 herein shall constitute the Main Contract of this Contract.
Party A agrees to provide guarantee for the existing creditor’s rights between the Debtor and Party B prior to effectiveness
of the maximum guarantee. In other words, Party A agrees to transfer the creditor’s rights under the
/
of No.
/
to the scope of the creditor’s rights guaranteed under
this Contract.
1.2 The business type of the Principal Creditor’s Rights secured by Party A shall be the same as that agreed in the Main Contract.
1.3 The maximum amount of the creditor’s rights guaranteed hereunder is: Currency RMB , amount (in words) Fifty Million Yuan Only (The amount of a foreign currency transaction shall be converted according to the selling price of foreign exchange listed by Party B on the date when the transaction occurs.).
The term “maximum amount of creditor’s rights” means the balance of the financing limit of the maximum principal creditor’s rights (hereinafter referred to as “the Financed Balance”, specifically as follows:
1.3.1 The amount of the outstanding Financed Balanced used by the Debtor of the Main Contract at any time shall not exceed the limit specified in the preceding paragraph. However, the Debtor of the Main Contract may apply for recycling the financing limit paid to the extend of this limit;
1.3.2 The maximum amount of creditor’s rights shall be the maximum amount of the principals of the Principal Creditor’s Rights. If the principal does not exceed this limit, Party A is willing to bear guarantee liability for all the accounts payable arising therefrom and within the scope specified in Article 2, including interest, default interest and expenses.
1.4 The period of the principal credit’s right guaranteed hereunder shall be from Oct 23, 2017 to Oct 23, 2018 . The stipulations of this article have the following meanings:
1.4.1 If the business specified in the Main Contract is a loan business, the date of release of each loan shall not be later than the expiry date of this period;
1.4.2 If the business specified in the Main Contract is a business of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods), the date of draft of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods) shall not be later than the expiry date of this period;
1.4.3 The expiry date of each creditor’s right shall be subject to the date agreed in the specific business contract and shall not be affected by the expiration of this period.
Article 2 Scope of Suretyship Guaranty
2.1 The scope of suretyship guaranty of Party A includes the principal, interest, overdue interest, default interest and compound interest of the Principal Creditor’s Rights, penalty, damages, exchange loss (loss arising from change of exchange rate), and appraisal cost, evaluation cost, auction cost, legal cost, arbitration fee, notarization fee and attorney fee, and other reasonable expenses of Party B for realizing creditor’s rights, and other expenses payable by the Debtor of the Main Contract.
2.2 All expenses except principal within the scope specified in the preceding paragraph shall be included in the scope of guarantee liability bearable by Party A but shall not be included in the maximum amount of creditor’s rights guaranteed hereunder.
Article 3 Determination and Suretyship Modes of the Creditor’s Rights Guaranteed
3.1 The creditor’s rights guaranteed under this Contract shall be determined under any one of the following circumstances:
3.1.1 the period of the creditor’s right specified in Article 1.4 of this Contract expires;
3.1.2 it is impossible to occur a new creditor’s right;
3.1.3 the Debtor of the Main Contract and Party A are announced bankruptcy or cancelled;
3.1.4 the Creditor under the Main Contract announces acceleration of all or part of debts under the Main Contract by law or according to relevant stipulations of the Main Contract; or
3.1.5 other circumstances for determining the creditor’s rights guaranteed by law.
3.2 When a creditor’s right guaranteed under this Contract is determined, the following shall become effective:
3.2.1 When the creditor’s right guaranteed under this Contract is determined, the outstanding creditor’s right under the Main Contract shall be included in the scope of the creditor’s right guaranteed no matter whether the performance period of the creditor’s right has expired or not or there is any other additional condition;
3.2.2 When the creditor’s right guaranteed under this Contract is determined, all funds other than principals specified in Article 2 of this Contract shall be included in the scope of the creditor’s right guaranteed no matter whether the funds have been occurred or not.
3.3 Suretyship of joint and several liability is adopted as the method of guarantee by Party A. From the date when the creditor’s rights guaranteed under this Contract are determined to the date of full repayment of the creditor’s rights guaranteed, if the Debtor of the Main Contract fails to perform the obligation of repayment of debts, Party B shall have the right to directly claim Party A for compensation and Party A shall repay Party B relevant debts immediately.
3.4 If, besides the guaranty method agreed in this Contract, there is any other guarantee (including but not limited to the guarantee that the Debtor of the Main Contract provides Party B), Party B shall have the right to firstly exercise the rights under this Contract and request Party A to bear joint and several suretyship liability. Party A’s suretyship liability for Party B shall not be affected by any other guarantee. Party A shall not be exempted or reduced from the liability of suretyship guaranty by an excuse of other guarantees. Meanwhile, Party A’s suretyship liability may not be premised at Party B’s filing of any right claim against any other guarantor or Party B’s execution of lawsuit / arbitration / enforcement. In the event that Party B waives or changes for any reason the other security provided by the Debtor of the Main Contractor, or changes the security sequence, resulting in loss or reduction of its priority to gain compensation under othersecurity mentioned above, Party A agrees that Party A’s suretyship liability hereunder may not be exempted or reduced.
3.5 If Party A provides guarantee for part creditor’s rights under the Main Contract, any compensation for the principal creditor’s rights shall not reduce or exempt Party A’s guarantee liability. Party A shall also bear guarantee liability for the outstanding amount under the Main Contract to the extent of the amount guaranteed by Party A.
Article 4 Period of Suretyship
4.1 The period of suretyship that Party A bears suretyship liability shall be two years from the date determined according to the following method:
4.1.1 If the expiry date of the performance period of a debt is earlier than or equals to the date of determination of the creditor’s rights guaranteed, the period of suretyship that Party A bears suretyship liability for the debt shall be from the date of determination of the creditor’s rights guaranteed;
4.1.2 If the expiry date of the performance period of a debt is later than the date of determination of the creditor’s right guaranteed, the period of suretyship that Party A bears suretyship liability for the debt shall be from the expiry date of the performance period of this debt.
4.2 The term “expiry date of the performance period of a debt” indicated in the preceding paragraph includes the expiry date of the debt when the Debtor of the Main Contract repays the debt by installments and also includes the expiry date of acceleration announced by the Creditor according to the stipulations of the Main Contract.
4.3 If the business under the Main Contract is a business of letter of credit, bank acceptance bill, letter of guarantee or letter of guarantee for the release of goods, the date of advancement shall be deemed as the expiry date of the performance period of the debt.
Article 5 Party A’s Representations and Warranties
Party A hereby makes the following representations and warranties to Party B:
5.1 Party A is a legal entity duly established and validly existing, has the qualifications for guarantors prescribed by law and the ability of repayment on behalf of others. Party A is willing to bear and perform suretyship liability to the extent of the assets Party A possesses or has the right to dispose.
5.2 For the purpose of signature of this Contract, Party A has obtained approval from competent authorities prescribed by law and stipulated in the company’s articles of association, including the superior competent department of Party A or the board of directors, shareholders' meeting or shareholders’ general meeting of Party A’s company, and has obtained all necessary authorizations.
5.3 The signature and execution of this Contract by Party A does not violate the stipulations or provisions binding upon Party A and Party A’s assets, nor violate any guarantee agreement and other agreement between Party A and another party, as well as any other documents, agreements and commitments binding upon Party A.
5.4 If Party A is a listed company or a branch controlled by a listed company, Party A warrants performing the obligation of information disclosure of the guaranty items timely in accordance with the Securities Law , the Share Listing Rules of Stock Exchange , and the requirements of other relevant laws, rules and regulations.
5.5 All documents and materials that Party A provides Party B shall be genuine, accurate, legitimate and effective.
5.6 Party A is aware of and agrees all terms and conditions of the Main Contract and understands the operating conditions and financial status of the Debtor of the Main Contract, the actual purpose of the financed capital and the trade background of financing. Party A acknowledges the genuine and legitimacy of the Main Contract and is willing to provide suretyship for the Debtor of the Main Contract. Party A warrants that Party A shall perform joint and several obligation of repayment pursuant to this Contract.
5.7 Where the Main Contract under this Contract is a Bank Acceptance Agreement , Party A shall ensure that any and all note and non-note dispute between the Debtor of the Main Contract and the bearer, endorser or other parties of the acceptance bill will not affect Party A to bear suretyship liability for Party B according to the stipulations of this Contract.
5.8 If the principal creditor’s rights guaranteed under this Contract are the international trade financing that Party B provides the Debtor of the Main Contract, Party A shall accept and recognize relevant international common practice of the related business.
5.9 Party A shall not to provide a third party with any other form of guarantee exceeding his guarantee ability during the valid period of this Contract.
Article 6 Party A’s Rights and Obligations
6.1 During the valid period of this Contract, Party A shall perform suretyship liability hereunder unconditionally within five working days after receiving Party B’s notice under any one of the following circumstances:
6.1.1 the performance period of a debt under the principal creditor’s rights expires and Party B is not paid;
6.1.2 a debt under the Main Contract is due in advanced in accordance with laws or the Main Contract, and Party B is not paid;
6.1.3 Party A or the Debtor of the Main Contract is filed reorganization or bankruptcy, suspends its business for rectification, is announced closed or is announced dissolved (cancelled);
6.1.4 Party A has any other event which has endangered or damaged or may endanger or damage Party B’s rights and interests; or
6.1.5 Other circumstances that Party A shall perform suretyship liability as prescribed by laws and regulations or stipulated by the Main Contract or this Contract.
6.2 Party A shall continue to perform suretyship liability under this Contract without obtaining Party A’s consent under any one of the following circumstances:
6.2.1 Party B and the Debtor of the Main Contract reach an agreement on change of the Main Contract and such change does not increase the Debtor’s debts;
6.2.2 Under international and domestic trade financing, Party B and the Debtor of the Main Contract changes the L/C or letter of guarantee in connection with the Main Contract, and such change does not increases the Debtor’s obligation of payment under the L/C or letter of guarantee; or
6.2.3 Party B transfers the principal creditor’s rights.
6.3 During the valid period of this Contract, Party A shall, according to Party B’s requirements, provide balance sheet, statement of incomes, statement of cash flows and other financial statements, and accept Party B’s inspection and supervision on Party A’s production and operation activities and financial status.
6.4 Party A shall notify Party B in written form and implement all suretyship liabilities under this Contract thirty days prior to the following changes during the valid period of this Contract, including but not limited to contracting, lease, custody, reorganization of assets, reconstruction of debts, transformation of equity system, joint operation, business combination (or merger), division, paid transfer of property, joint investment (or cooperation), reduce of registered capital, or filing for winding-up, filing for dissolution (or cancellation), filing for reorganization, mediation and bankruptcy, or change of self system or legal status.
6.5 During the valid period of this Contract, Party A shall notify Party B in written form thirty days prior to the following changes when it is announced winding-up, is announced closed, is announced dissolved (cancelled), is filed reorganization or bankruptcy, or changes self system and legal status, or has any other change which is enough to endanger Party A’s normal operation and lose the guarantee ability.
6.6 If Party A changes Party A’s address, name or legal representative, Party A shall notify Party B in written form within seven days after such change.
6.7 If the loan under the Main Contract is used for borrowing or repaying, Party A is willing to bear suretyship liability.
6.8 Party A shall sign in timely various notices posted or served by other means by Party B.
6.9 In case of any one of the following circumstances occurring to the purchaser’s financing under a L/C, an import L/C and import bill advance/ import refinance businesses, Party A shall have the obligation of incontestable guaranty of suretyship. Party A shall not, for any payment obligation under the letter of credit specified by the judicial authority or the administrative authority, issue stop payment order or restraining order, or take measures to seal, detain and freeze relevant property of the letter of credit or take other similar measures to present exemption or defense:
6.9.1 the person designated or authorized by Party B has favorably paid according to Party B’s order;
6.9.2 Party B or the person designated or authorized by Party B has favorably issued a due payment confirmation for the loan under the domestic letter of credit or has favorably accepted the documents under the import letter of credit;
6.9.3 the confirming bank of the L/C has favorably performed the obligation of payment;
6.9.4 the negotiation bank of the L/C has favorably made negotiation.
6.10 Under shipping guarantee, endorsement of bill of lading and authorized withdrawal, Party A shall not present exemption or defense because the Debtor of the Main Contract refuses payment of the relevant L/C.
Article 7 Party B’s Rights and Obligations
7.1 Party B is entitled to demand Party A at any time to provide the financial reports, financial statements or other data reflecting Party A’s operation conditions and credit status.
7.2 If Party A does not perform its liability hereunder according to the stipulations of this Contract, Party B shall have the right to deduct Party A’s accounts payable directly from an account opened by Party A with any banking institution of Huaxia Bank and Party B shall notify Party A timely. If the account currency is different from the currency of the principal creditor’s rights when Party B makes deduction from Party A’s account, translation shall be made according to the foreign exchange rate issued by Party B on the date of deduction. Should RMB be translated into a foreign currency, translation shall be made according to the selling price of the foreign currency; should a foreign currency be translated into RMB, translation shall be made according to the buying price of the foreign currency.
7.3 When Party B and the Debtor of the Main Contract concludes and signs a specific business contract (or agreement), Party A may not be notified.
Article 8 Liability for Breach of Contract
When this Contract becomes effective, Party A and Party B shall perform the obligations specified in this Contract. Any party which fails to wholly or partly perform its obligations specified herein or violates its representations, warranties and commitments made hereunder shall undertake relevant liabilities for breach of contract and make compensation for losses caused to the other party.
Article 9 Effectiveness of Contract
9.1 This Contract shall enter into force as of the date of signature of both parties.
9.2 The validity of this Contract shall be independent of the Main Contract and may not be affected by the invalidity of the Main Contract. If the Main Contract is confirmed as invalid, Party A shall assume joint and several suretyship liability for the debts arising from the Debtor’s return of property or compensation for losses.
Article 10 Transfer, Change and Cancellation of Contract
10.1 Party A or Party B shall not change or cancel this Contract without permission after the effectiveness of this Contract.
10.2 Party B may transfer the Principal Creditor’s Rights to a third person within the valid period of this Contract without obtaining Party A’s consent, and Party A shall continue to bear joint and several suretyship liability within the original scope of suretyship.
10.3 Without Party B’s written consent, Party A shall not transfer all or part of its rights or obligations under this Contract.
Article 11 Confidentiality
Party A or Party B shall bear the obligation of confidentiality for the other party’s business secret, contractual clauses and other information related to interest acquired during the signature and execution processes of this Contract, but shall not disclose the aforesaid information to a third party without the other party’s consent, except otherwise prescribed by laws, regulations and regulatory policies.
Article 12 Governing Laws and Dispute Settlement
12.1 This Contract applies to the laws of the People's Republic of China.
12.2 Any and all disputes arising from the execution of this Contract between Party A and Party B shall be settled through consultation; where consultation fails, both parties agree to settle the dispute according to the following method:
To bring a case to the
local people’s court
at the domicile of Party B
;
To apply
/
Arbitration Committee for arbitration.
12.3 If the method selected above for dispute settlement is different from the method for dispute settlement under the Main Contract, the method for dispute settlement under the Main Contract shall prevail.
Article 13 Notice and Service
During the valid period of this Contract, if Party A changes its information first given in this Contract without notifying Party B in written form, including name of Party A’s legal person, legal representative, domicile and telephone number, all documents that Party B sends to Party A according to Party A’s information given in this Contract shall be deemed as having been served.
Article 14 Supplementary Provisions
14.1 Party A authorizes Party B to, in accordance with relevant laws and regulations, or other regulatory documents or requirements of financial regulators, provide the relevant information of the Contract and other relevant information for the credit information basic database of the People’s Bank of China or other credit database established by law for the qualified institutions or individuals to search and use. Party A also authorizes Party B to, for the purpose of the conclusion and performance of the Contract, search Party B’s relevant information through the credit information basic database of the People’s Bank of China or other credit database established by law.
14.2 Other provisions agreed by both parties:
14.3 If selection is made in □ under this Contract, this clause shall apply if √ is ticked in □ but shall not apply if × is given in □.
14.4 This Contract shall be provided for Party A holding one original, Party B holding two originals and the Debtor holding one original, which shall be equally authentic.
14.5 Annexes of this Contract shall be deemed as an integral part of this Contract and have the same equal legal force as this Contract.
14.6 Party B has take reasonable measures to remind Party A to pay attention to the clauses of exempting or restricting Party B’s responsibilities and, according to Party A’s requirements, has given full explanation of relevant clauses. Party A and Party B have no objection to the understanding of the contents of all clauses of this Contract.
(The remainder of this page is intentionally left blank.)
Page of signature (the remainder of this page is intentionally left blank.)
Party A: | (Seal) |
Huizhou Highpower Technology Co., Ltd. (Seal) |
Legal Representative: | |
(Or Authorized Agent): | (Signature) |
Party B: | (Seal) |
Huaxia Bank Co., Ltd. Shenzhen Great China Sub-branch (Seal) |
Legal Representative / Main Principal: | |
(Or Authorized Agent) | (Signature or Seal) |
Exhibit 10.25(d)
Maximum Guarantee Contract
Huaxia Bank Co., Ltd.
Maximum Guarantee Contract
No.: SZ03 (G.B.) 20170028-13
Party A (Guarantor): Icon Energy System (Shenzhen) Co., Ltd.
Domicile: block A,4/F, Jinmeiwei Industrial Park, Guanlan Hi-tech lndustrial Park, Shangkeng Community, Guan lan Town, Baoan District, Shenzhen
Zip Code: 51800
Legal Representative: Pan Dangyu
Tel.: 0755-89686802
Fax: 0755-89686802
Basic Account Opening Bank: Bank of China Shenzhen Branch
Account No.: ***
Party B: Huaxia Bank Co., Ltd. Shenzhen Great China Sub-branch
Domicile: East of First Floor, Great China International Exchange Square, Futian District, Shenzhen
Zip Code: 518000
Legal Representative / Main Principal: Xia Feng
Tel.: 0755-23997085
Fax: 0755-23997090
In accordance with the Guarantee Law of the People's Republic of China and other relevant laws and regulations, whereas Party B will have many creditor’s rights continuously with the Debtor Springpower Technology (Shenzhen) Co., Ltd. (hereinafter referred to as “the Debtor of the Main Contract) on the basis of the Main Contract during the period agreed herein, and Party A is willing to provide Party B with suretyship guaranty for the aforesaid creditor’s rights (hereinafter referred to as “the Principal Creditor’s Rights”) to the extent of the total amount of the creditor’s rights, IN WITNESS WHEREOF, Party A and Party B make and enter into this Contract upon unanimity through consultation.
Article 1 Type, Maximum Amount and Period of the Principal Creditor’s Rights Guaranteed
1.1 The Main Contract of this Contract is selected as follows:
The
Maximum Financing Contract
of
SZ03 (R.Z.) 20170028
made and entered into by and between Party B and the
Debtor of the Main Contract; the contract and the specific business contract thereunder shall constitute the Main Contract of this
Contract;
/
continuously made and entered into by and between Party B and the Debtor of the Main Contract during the period of Principal
Creditor’s Rights specified in Article 1.4 herein shall constitute the Main Contract of this Contract.
Party A agrees to provide guarantee for the existing creditor’s rights between the Debtor and Party B prior to effectiveness
of the maximum guarantee. In other words, Party A agrees to transfer the creditor’s rights under the
/
of No.
/
to the scope of the creditor’s rights guaranteed under this Contract.
1.2 The business type of the Principal Creditor’s Rights secured by Party A shall be the same as that agreed in the Main Contract.
1.3 The maximum amount of the creditor’s rights guaranteed hereunder is: Currency RMB , amount (in words) Fifty Million Yuan Only (The amount of a foreign currency transaction shall be converted according to the selling price of foreign exchange listed by Party B on the date when the transaction occurs.).
The term “maximum amount of creditor’s rights” means the balance of the financing limit of the maximum principal creditor’s rights (hereinafter referred to as “the Financed Balance”, specifically as follows:
1.3.1 The amount of the outstanding Financed Balanced used by the Debtor of the Main Contract at any time shall not exceed the limit specified in the preceding paragraph. However, the Debtor of the Main Contract may apply for recycling the financing limit paid to the extend of this limit;
1.3.2 The maximum amount of creditor’s rights shall be the maximum amount of the principals of the Principal Creditor’s Rights. If the principal does not exceed this limit, Party A is willing to bear guarantee liability for all the accounts payable arising therefrom and within the scope specified in Article 2, including interest, default interest and expenses.
1.4 The period of the principal credit’s right guaranteed hereunder shall be from Oct 23, 2017 to Oct 23, 2018 . The stipulations of this article have the following meanings:
1.4.1 If the business specified in the Main Contract is a loan business, the date of release of each loan shall not be later than the expiry date of this period;
1.4.2 If the business specified in the Main Contract is a business of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods), the date of draft of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods) shall not be later than the expiry date of this period;
1.4.3 The expiry date of each creditor’s right shall be subject to the date agreed in the specific business contract and shall not be affected by the expiration of this period.
Article 2 Scope of Suretyship Guaranty
2.1 The scope of suretyship guaranty of Party A includes the principal, interest, overdue interest, default interest and compound interest of the Principal Creditor’s Rights, penalty, damages, exchange loss (loss arising from change of exchange rate), and appraisal cost, evaluation cost, auction cost, legal cost, arbitration fee, notarization fee and attorney fee, and other reasonable expenses of Party B for realizing creditor’s rights, and other expenses payable by the Debtor of the Main Contract.
2.2 All expenses except principal within the scope specified in the preceding paragraph shall be included in the scope of guarantee liability bearable by Party A but shall not be included in the maximum amount of creditor’s rights guaranteed hereunder.
Article 3 Determination and Suretyship Modes of the Creditor’s Rights Guaranteed
3.1 The creditor’s rights guaranteed under this Contract shall be determined under any one of the following circumstances:
3.1.1 the period of the creditor’s right specified in Article 1.4 of this Contract expires;
3.1.2 it is impossible to occur a new creditor’s right;
3.1.3 the Debtor of the Main Contract and Party A are announced bankruptcy or cancelled;
3.1.4 the Creditor under the Main Contract announces acceleration of all or part of debts under the Main Contract by law or according to relevant stipulations of the Main Contract; or
3.1.5 other circumstances for determining the creditor’s rights guaranteed by law.
3.2 When a creditor’s right guaranteed under this Contract is determined, the following shall become effective:
3.2.1 When the creditor’s right guaranteed under this Contract is determined, the outstanding creditor’s right under the Main Contract shall be included in the scope of the creditor’s right guaranteed no matter whether the performance period of the creditor’s right has expired or not or there is any other additional condition;
3.2.2 When the creditor’s right guaranteed under this Contract is determined, all funds other than principals specified in Article 2 of this Contract shall be included in the scope of the creditor’s right guaranteed no matter whether the funds have been occurred or not.
3.3 Suretyship of joint and several liability is adopted as the method of guarantee by Party A. From the date when the creditor’s rights guaranteed under this Contract are determined to the date of full repayment of the creditor’s rights guaranteed, if the Debtor of the Main Contract fails to perform the obligation of repayment of debts, Party B shall have the right to directly claim Party A for compensation and Party A shall repay Party B relevant debts immediately.
3.4 If, besides the guaranty method agreed in this Contract, there is any other guarantee (including but not limited to the guarantee that the Debtor of the Main Contract provides Party B), Party B shall have the right to firstly exercise the rights under this Contract and request Party A to bear joint and several suretyship liability. Party A’s suretyship liability for Party B shall not be affected by any other guarantee. Party A shall not be exempted or reduced from the liability of suretyship guaranty by an excuse of other guarantees. Meanwhile, Party A’s suretyship liability may not be premised at Party B’s filing of any right claim against any other guarantor or Party B’s execution of lawsuit / arbitration / enforcement. In the event that Party B waives or changes for any reason the other security provided by the Debtor of the Main Contractor, or changes the security sequence, resulting in loss or reduction of its priority to gain compensation under othersecurity mentioned above, Party A agrees that Party A’s suretyship liability hereunder may not be exempted or reduced.
3.5 If Party A provides guarantee for part creditor’s rights under the Main Contract, any compensation for the principal creditor’s rights shall not reduce or exempt Party A’s guarantee liability. Party A shall also bear guarantee liability for the outstanding amount under the Main Contract to the extent of the amount guaranteed by Party A.
Article 4 Period of Suretyship
4.1 The period of suretyship that Party A bears suretyship liability shall be two years from the date determined according to the following method:
4.1.1 If the expiry date of the performance period of a debt is earlier than or equals to the date of determination of the creditor’s rights guaranteed, the period of suretyship that Party A bears suretyship liability for the debt shall be from the date of determination of the creditor’s rights guaranteed;
4.1.2 If the expiry date of the performance period of a debt is later than the date of determination of the creditor’s right guaranteed, the period of suretyship that Party A bears suretyship liability for the debt shall be from the expiry date of the performance period of this debt.
4.2 The term “expiry date of the performance period of a debt” indicated in the preceding paragraph includes the expiry date of the debt when the Debtor of the Main Contract repays the debt by installments and also includes the expiry date of acceleration announced by the Creditor according to the stipulations of the Main Contract.
4.3 If the business under the Main Contract is a business of letter of credit, bank acceptance bill, letter of guarantee or letter of guarantee for the release of goods, the date of advancement shall be deemed as the expiry date of the performance period of the debt.
Article 5 Party A’s Representations and Warranties
Party A hereby makes the following representations and warranties to Party B:
5.1 Party A is a legal entity duly established and validly existing, has the qualifications for guarantors prescribed by law and the ability of repayment on behalf of others. Party A is willing to bear and perform suretyship liability to the extent of the assets Party A possesses or has the right to dispose.
5.2 For the purpose of signature of this Contract, Party A has obtained approval from competent authorities prescribed by law and stipulated in the company’s articles of association, including the superior competent department of Party A or the board of directors, shareholders' meeting or shareholders’ general meeting of Party A’s company, and has obtained all necessary authorizations.
5.3 The signature and execution of this Contract by Party A does not violate the stipulations or provisions binding upon Party A and Party A’s assets, nor violate any guarantee agreement and other agreement between Party A and another party, as well as any other documents, agreements and commitments binding upon Party A.
5.4 If Party A is a listed company or a branch controlled by a listed company, Party A warrants performing the obligation of information disclosure of the guaranty items timely in accordance with the Securities Law , the Share Listing Rules of Stock Exchange , and the requirements of other relevant laws, rules and regulations.
5.5 All documents and materials that Party A provides Party B shall be genuine, accurate, legitimate and effective.
5.6 Party A is aware of and agrees all terms and conditions of the Main Contract and understands the operating conditions and financial status of the Debtor of the Main Contract, the actual purpose of the financed capital and the trade background of financing. Party A acknowledges the genuine and legitimacy of the Main Contract and is willing to provide suretyship for the Debtor of the Main Contract. Party A warrants that Party A shall perform joint and several obligation of repayment pursuant to this Contract.
5.7 Where the Main Contract under this Contract is a Bank Acceptance Agreement , Party A shall ensure that any and all note and non-note dispute between the Debtor of the Main Contract and the bearer, endorser or other parties of the acceptance bill will not affect Party A to bear suretyship liability for Party B according to the stipulations of this Contract.
5.8 If the principal creditor’s rights guaranteed under this Contract are the international trade financing that Party B provides the Debtor of the Main Contract, Party A shall accept and recognize relevant international common practice of the related business.
5.9 Party A shall not to provide a third party with any other form of guarantee exceeding his guarantee ability during the valid period of this Contract.
Article 6 Party A’s Rights and Obligations
6.1 During the valid period of this Contract, Party A shall perform suretyship liability hereunder unconditionally within five working days after receiving Party B’s notice under any one of the following circumstances:
6.1.1 the performance period of a debt under the principal creditor’s rights expires and Party B is not paid;
6.1.2 a debt under the Main Contract is due in advanced in accordance with laws or the Main Contract, and Party B is not paid;
6.1.3 Party A or the Debtor of the Main Contract is filed reorganization or bankruptcy, suspends its business for rectification, is announced closed or is announced dissolved (cancelled);
6.1.4 Party A has any other event which has endangered or damaged or may endanger or damage Party B’s rights and interests; or
6.1.5 Other circumstances that Party A shall perform suretyship liability as prescribed by laws and regulations or stipulated by the Main Contract or this Contract.
6.2 Party A shall continue to perform suretyship liability under this Contract without obtaining Party A’s consent under any one of the following circumstances:
6.2.1 Party B and the Debtor of the Main Contract reach an agreement on change of the Main Contract and such change does not increase the Debtor’s debts;
6.2.2 Under international and domestic trade financing, Party B and the Debtor of the Main Contract changes the L/C or letter of guarantee in connection with the Main Contract, and such change does not increases the Debtor’s obligation of payment under the L/C or letter of guarantee; or
6.2.3 Party B transfers the principal creditor’s rights.
6.3 During the valid period of this Contract, Party A shall, according to Party B’s requirements, provide balance sheet, statement of incomes, statement of cash flows and other financial statements, and accept Party B’s inspection and supervision on Party A’s production and operation activities and financial status.
6.4 Party A shall notify Party B in written form and implement all suretyship liabilities under this Contract thirty days prior to the following changes during the valid period of this Contract, including but not limited to contracting, lease, custody, reorganization of assets, reconstruction of debts, transformation of equity system, joint operation, business combination (or merger), division, paid transfer of property, joint investment (or cooperation), reduce of registered capital, or filing for winding-up, filing for dissolution (or cancellation), filing for reorganization, mediation and bankruptcy, or change of self system or legal status.
6.5 During the valid period of this Contract, Party A shall notify Party B in written form thirty days prior to the following changes when it is announced winding-up, is announced closed, is announced dissolved (cancelled), is filed reorganization or bankruptcy, or changes self system and legal status, or has any other change which is enough to endanger Party A’s normal operation and lose the guarantee ability.
6.6 If Party A changes Party A’s address, name or legal representative, Party A shall notify Party B in written form within seven days after such change.
6.7 If the loan under the Main Contract is used for borrowing or repaying, Party A is willing to bear suretyship liability.
6.8 Party A shall sign in timely various notices posted or served by other means by Party B.
6.9 In case of any one of the following circumstances occurring to the purchaser’s financing under a L/C, an import L/C and import bill advance/ import refinance businesses, Party A shall have the obligation of incontestable guaranty of suretyship. Party A shall not, for any payment obligation under the letter of credit specified by the judicial authority or the administrative authority, issue stop payment order or restraining order, or take measures to seal, detain and freeze relevant property of the letter of credit or take other similar measures to present exemption or defense:
6.9.1 the person designated or authorized by Party B has favorably paid according to Party B’s order;
6.9.2 Party B or the person designated or authorized by Party B has favorably issued a due payment confirmation for the loan under the domestic letter of credit or has favorably accepted the documents under the import letter of credit;
6.9.3 the confirming bank of the L/C has favorably performed the obligation of payment;
6.9.4 the negotiation bank of the L/C has favorably made negotiation.
6.10 Under shipping guarantee, endorsement of bill of lading and authorized withdrawal, Party A shall not present exemption or defense because the Debtor of the Main Contract refuses payment of the relevant L/C.
Article 7 Party B’s Rights and Obligations
7.1 Party B is entitled to demand Party A at any time to provide the financial reports, financial statements or other data reflecting Party A’s operation conditions and credit status.
7.2 If Party A does not perform its liability hereunder according to the stipulations of this Contract, Party B shall have the right to deduct Party A’s accounts payable directly from an account opened by Party A with any banking institution of Huaxia Bank and Party B shall notify Party A timely. If the account currency is different from the currency of the principal creditor’s rights when Party B makes deduction from Party A’s account, translation shall be made according to the foreign exchange rate issued by Party B on the date of deduction. Should RMB be translated into a foreign currency, translation shall be made according to the selling price of the foreign currency; should a foreign currency be translated into RMB, translation shall be made according to the buying price of the foreign currency.
7.3 When Party B and the Debtor of the Main Contract concludes and signs a specific business contract (or agreement), Party A may not be notified.
Article 8 Liability for Breach of Contract
When this Contract becomes effective, Party A and Party B shall perform the obligations specified in this Contract. Any party which fails to wholly or partly perform its obligations specified herein or violates its representations, warranties and commitments made hereunder shall undertake relevant liabilities for breach of contract and make compensation for losses caused to the other party.
Article 9 Effectiveness of Contract
9.1 This Contract shall enter into force as of the date of signature of both parties.
9.2 The validity of this Contract shall be independent of the Main Contract and may not be affected by the invalidity of the Main Contract. If the Main Contract is confirmed as invalid, Party A shall assume joint and several suretyship liability for the debts arising from the Debtor’s return of property or compensation for losses.
Article 10 Transfer, Change and Cancellation of Contract
10.1 Party A or Party B shall not change or cancel this Contract without permission after the effectiveness of this Contract.
10.2 Party B may transfer the Principal Creditor’s Rights to a third person within the valid period of this Contract without obtaining Party A’s consent, and Party A shall continue to bear joint and several suretyship liability within the original scope of suretyship.
10.3 Without Party B’s written consent, Party A shall not transfer all or part of its rights or obligations under this Contract.
Article 11 Confidentiality
Party A or Party B shall bear the obligation of confidentiality for the other party’s business secret, contractual clauses and other information related to interest acquired during the signature and execution processes of this Contract, but shall not disclose the aforesaid information to a third party without the other party’s consent, except otherwise prescribed by laws, regulations and regulatory policies.
Article 12 Governing Laws and Dispute Settlement
12.1 This Contract applies to the laws of the People's Republic of China.
12.2 Any and all disputes arising from the execution of this Contract between Party A and Party B shall be settled through consultation; where consultation fails, both parties agree to settle the dispute according to the following method:
To bring a case to the local people’s court
at the domicile of Party B
;
To apply
/
Arbitration Committee for arbitration.
12.3 If the method selected above for dispute settlement is different from the method for dispute settlement under the Main Contract, the method for dispute settlement under the Main Contract shall prevail.
Article 13 Notice and Service
During the valid period of this Contract, if Party A changes its information first given in this Contract without notifying Party B in written form, including name of Party A’s legal person, legal representative, domicile and telephone number, all documents that Party B sends to Party A according to Party A’s information given in this Contract shall be deemed as having been served.
Article 14 Supplementary Provisions
14.1 Party A authorizes Party B to, in accordance with relevant laws and regulations, or other regulatory documents or requirements of financial regulators, provide the relevant information of the Contract and other relevant information for the credit information basic database of the People’s Bank of China or other credit database established by law for the qualified institutions or individuals to search and use. Party A also authorizes Party B to, for the purpose of the conclusion and performance of the Contract, search Party B’s relevant information through the credit information basic database of the People’s Bank of China or other credit database established by law.
14.2 Other provisions agreed by both parties:
14.3 If selection is made in □ under this Contract, this clause shall apply if √ is ticked in □ but shall not apply if × is given in □.
14.4 This Contract shall be provided for Party A holding one original, Party B holding two originals and the Debtor holding one original, which shall be equally authentic.
14.5 Annexes of this Contract shall be deemed as an integral part of this Contract and have the same equal legal force as this Contract.
14.6 Party B has take reasonable measures to remind Party A to pay attention to the clauses of exempting or restricting Party B’s responsibilities and, according to Party A’s requirements, has given full explanation of relevant clauses. Party A and Party B have no objection to the understanding of the contents of all clauses of this Contract.
(The remainder of this page is intentionally left blank.)
Page of signature (the remainder of this page is intentionally left blank.)
Party A: | (Seal) |
lcon Energy System (Shenzhen) Co., Ltd . (Seal)
Legal Representative:
(Or Authorized Agent): | (Signature) |
Party B: | (Seal) |
Huaxia Bank Co., Ltd. Shenzhen Great China Sub-branch (Seal)
Legal Representative / Main Principal:
(Or Authorized Agent) | (Signature or Seal) |
Exhibit 10.25(e)
Maximum Guarantee Contract
Huaxia Bank Co., Ltd.
Maximum Guarantee Contract
No.: SZ03 (G.B.) 20170028-11
Party A (Guarantor): Shenzhen Highpower Technology Co., Ltd.
Domicile: Bldg. 1, No. 68, Xinsha Road, Pinghu Street, Longgang District, Shenzhen
Zip Code: 51800
Legal Representative: Pan Dangyu
Tel.: 0755-89686802
Fax: 0755-89666819
Basic Account Opening Bank: Bank of China Shenzhen Branch
Account No.: xxxxx
Party B: Huaxia Bank Co., Ltd. Shenzhen Great China Sub-branch
Domicile: East of First Floor, Great China International Exchange Square, Futian District, Shenzhen
Zip Code: 518000
Legal Representative / Main Principal: Xia Feng
Tel.: 0755-23997085
Fax: 0755-23997090
In accordance with the Guarantee Law of the People's Republic of China and other relevant laws and regulations, whereas Party B will have many creditor’s rights continuously with the Debtor Springpower Technology (Shenzhen) Co., Ltd. (hereinafter referred to as “the Debtor of the Main Contract) on the basis of the Main Contract during the period agreed herein, and Party A is willing to provide Party B with suretyship guaranty for the aforesaid creditor’s rights (hereinafter referred to as “the Principal Creditor’s Rights”) to the extent of the total amount of the creditor’s rights, IN WITNESS WHEREOF, Party A and Party B make and enter into this Contract upon unanimity through consultation.
Article 1 Type, Maximum Amount and Period of the Principal Creditor’s Rights Guaranteed
1.1 The Main Contract of this Contract is selected as follows:
The
Maximum Financing Contract
of
SZ03 (R.Z.) 20170028
made and entered into by and between Party B and the
Debtor of the Main Contract; the contract and the specific business contract thereunder shall constitute the Main Contract of this
Contract;
/
continuously made and entered into by and between Party B and the Debtor of the Main Contract during the period of Principal Creditor’s
Rights specified in Article 1.4 herein shall constitute the Main Contract of this Contract.
Party A agrees to provide guarantee for the existing creditor’s rights between the Debtor and Party B prior to effectiveness
of the maximum guarantee. In other words, Party A agrees to transfer the creditor’s rights under the
/
of
No.
/
to the scope of the creditor’s rights guaranteed under this Contract.
1.2 The business type of the Principal Creditor’s Rights secured by Party A shall be the same as that agreed in the Main Contract.
1.3 The maximum amount of the creditor’s rights guaranteed hereunder is: Currency RMB , amount (in words) Fifty Million Yuan Only (The amount of a foreign currency transaction shall be converted according to the selling price of foreign exchange listed by Party B on the date when the transaction occurs.).
The term “maximum amount of creditor’s rights” means the balance of the financing limit of the maximum principal creditor’s rights (hereinafter referred to as “the Financed Balance”, specifically as follows:
1.3.1 The amount of the outstanding Financed Balanced used by the Debtor of the Main Contract at any time shall not exceed the limit specified in the preceding paragraph. However, the Debtor of the Main Contract may apply for recycling the financing limit paid to the extend of this limit;
1.3.2 The maximum amount of creditor’s rights shall be the maximum amount of the principals of the Principal Creditor’s Rights. If the principal does not exceed this limit, Party A is willing to bear guarantee liability for all the accounts payable arising therefrom and within the scope specified in Article 2, including interest, default interest and expenses.
1.4 The period of the principal credit’s right guaranteed hereunder shall be from Oct 23, 2017 to Oct 23, 2018 . The stipulations of this article have the following meanings:
1.4.1 If the business specified in the Main Contract is a loan business, the date of release of each loan shall not be later than the expiry date of this period;
1.4.2 If the business specified in the Main Contract is a business of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods), the date of draft of acceptance of bill/discount/ opening of L/C/ opening of letter of guarantee (or letter of guarantee for the release of goods) shall not be later than the expiry date of this period;
1.4.3 The expiry date of each creditor’s right shall be subject to the date agreed in the specific business contract and shall not be affected by the expiration of this period.
Article 2 Scope of Suretyship Guaranty
2.1 The scope of suretyship guaranty of Party A includes the principal, interest, overdue interest, default interest and compound interest of the Principal Creditor’s Rights, penalty, damages, exchange loss (loss arising from change of exchange rate), and appraisal cost, evaluation cost, auction cost, legal cost, arbitration fee, notarization fee and attorney fee, and other reasonable expenses of Party B for realizing creditor’s rights, and other expenses payable by the Debtor of the Main Contract.
2.2 All expenses except principal within the scope specified in the preceding paragraph shall be included in the scope of guarantee liability bearable by Party A but shall not be included in the maximum amount of creditor’s rights guaranteed hereunder.
Article 3 Determination and Suretyship Modes of the Creditor’s Rights Guaranteed
3.1 The creditor’s rights guaranteed under this Contract shall be determined under any one of the following circumstances:
3.1.1 the period of the creditor’s right specified in Article 1.4 of this Contract expires;
3.1.2 it is impossible to occur a new creditor’s right;
3.1.3 the Debtor of the Main Contract and Party A are announced bankruptcy or cancelled;
3.1.4 the Creditor under the Main Contract announces acceleration of all or part of debts under the Main Contract by law or according to relevant stipulations of the Main Contract; or
3.1.5 other circumstances for determining the creditor’s rights guaranteed by law.
3.2 When a creditor’s right guaranteed under this Contract is determined, the following shall become effective:
3.2.1 When the creditor’s right guaranteed under this Contract is determined, the outstanding creditor’s right under the Main Contract shall be included in the scope of the creditor’s right guaranteed no matter whether the performance period of the creditor’s right has expired or not or there is any other additional condition;
3.2.2 When the creditor’s right guaranteed under this Contract is determined, all funds other than principals specified in Article 2 of this Contract shall be included in the scope of the creditor’s right guaranteed no matter whether the funds have been occurred or not.
3.3 Suretyship of joint and several liability is adopted as the method of guarantee by Party A. From the date when the creditor’s rights guaranteed under this Contract are determined to the date of full repayment of the creditor’s rights guaranteed, if the Debtor of the Main Contract fails to perform the obligation of repayment of debts, Party B shall have the right to directly claim Party A for compensation and Party A shall repay Party B relevant debts immediately.
3.4 If, besides the guaranty method agreed in this Contract, there is any other guarantee (including but not limited to the guarantee that the Debtor of the Main Contract provides Party B), Party B shall have the right to firstly exercise the rights under this Contract and request Party A to bear joint and several suretyship liability. Party A’s suretyship liability for Party B shall not be affected by any other guarantee. Party A shall not be exempted or reduced from the liability of suretyship guaranty by an excuse of other guarantees. Meanwhile, Party A’s suretyship liability may not be premised at Party B’s filing of any right claim against any other guarantor or Party B’s execution of lawsuit / arbitration / enforcement. In the event that Party B waives or changes for any reason the other security provided by the Debtor of the Main Contractor, or changes the security sequence, resulting in loss or reduction of its priority to gain compensation under othersecurity mentioned above, Party A agrees that Party A’s suretyship liability hereunder may not be exempted or reduced.
3.5 If Party A provides guarantee for part creditor’s rights under the Main Contract, any compensation for the principal creditor’s rights shall not reduce or exempt Party A’s guarantee liability. Party A shall also bear guarantee liability for the outstanding amount under the Main Contract to the extent of the amount guaranteed by Party A.
Article 4 Period of Suretyship
4.1 The period of suretyship that Party A bears suretyship liability shall be two years from the date determined according to the following method:
4.1.1 If the expiry date of the performance period of a debt is earlier than or equals to the date of determination of the creditor’s rights guaranteed, the period of suretyship that Party A bears suretyship liability for the debt shall be from the date of determination of the creditor’s rights guaranteed;
4.1.2 If the expiry date of the performance period of a debt is later than the date of determination of the creditor’s right guaranteed, the period of suretyship that Party A bears suretyship liability for the debt shall be from the expiry date of the performance period of this debt.
4.2 The term “expiry date of the performance period of a debt” indicated in the preceding paragraph includes the expiry date of the debt when the Debtor of the Main Contract repays the debt by installments and also includes the expiry date of acceleration announced by the Creditor according to the stipulations of the Main Contract.
4.3 If the business under the Main Contract is a business of letter of credit, bank acceptance bill, letter of guarantee or letter of guarantee for the release of goods, the date of advancement shall be deemed as the expiry date of the performance period of the debt.
Article 5 Party A’s Representations and Warranties
Party A hereby makes the following representations and warranties to Party B:
5.1 Party A is a legal entity duly established and validly existing, has the qualifications for guarantors prescribed by law and the ability of repayment on behalf of others. Party A is willing to bear and perform suretyship liability to the extent of the assets Party A possesses or has the right to dispose.
5.2 For the purpose of signature of this Contract, Party A has obtained approval from competent authorities prescribed by law and stipulated in the company’s articles of association, including the superior competent department of Party A or the board of directors, shareholders' meeting or shareholders’ general meeting of Party A’s company, and has obtained all necessary authorizations.
5.3 The signature and execution of this Contract by Party A does not violate the stipulations or provisions binding upon Party A and Party A’s assets, nor violate any guarantee agreement and other agreement between Party A and another party, as well as any other documents, agreements and commitments binding upon Party A.
5.4 If Party A is a listed company or a branch controlled by a listed company, Party A warrants performing the obligation of information disclosure of the guaranty items timely in accordance with the Securities Law , the Share Listing Rules of Stock Exchange , and the requirements of other relevant laws, rules and regulations.
5.5 All documents and materials that Party A provides Party B shall be genuine, accurate, legitimate and effective.
5.6 Party A is aware of and agrees all terms and conditions of the Main Contract and understands the operating conditions and financial status of the Debtor of the Main Contract, the actual purpose of the financed capital and the trade background of financing. Party A acknowledges the genuine and legitimacy of the Main Contract and is willing to provide suretyship for the Debtor of the Main Contract. Party A warrants that Party A shall perform joint and several obligation of repayment pursuant to this Contract.
5.7 Where the Main Contract under this Contract is a Bank Acceptance Agreement , Party A shall ensure that any and all note and non-note dispute between the Debtor of the Main Contract and the bearer, endorser or other parties of the acceptance bill will not affect Party A to bear suretyship liability for Party B according to the stipulations of this Contract.
5.8 If the principal creditor’s rights guaranteed under this Contract are the international trade financing that Party B provides the Debtor of the Main Contract, Party A shall accept and recognize relevant international common practice of the related business.
5.9 Party A shall not to provide a third party with any other form of guarantee exceeding his guarantee ability during the valid period of this Contract.
Article 6 Party A’s Rights and Obligations
6.1 During the valid period of this Contract, Party A shall perform suretyship liability hereunder unconditionally within five working days after receiving Party B’s notice under any one of the following circumstances:
6.1.1 the performance period of a debt under the principal creditor’s rights expires and Party B is not paid;
6.1.2 a debt under the Main Contract is due in advanced in accordance with laws or the Main Contract, and Party B is not paid;
6.1.3 Party A or the Debtor of the Main Contract is filed reorganization or bankruptcy, suspends its business for rectification, is announced closed or is announced dissolved (cancelled);
6.1.4 Party A has any other event which has endangered or damaged or may endanger or damage Party B’s rights and interests; or
6.1.5 Other circumstances that Party A shall perform suretyship liability as prescribed by laws and regulations or stipulated by the Main Contract or this Contract.
6.2 Party A shall continue to perform suretyship liability under this Contract without obtaining Party A’s consent under any one of the following circumstances:
6.2.1 Party B and the Debtor of the Main Contract reach an agreement on change of the Main Contract and such change does not increase the Debtor’s debts;
6.2.2 Under international and domestic trade financing, Party B and the Debtor of the Main Contract changes the L/C or letter of guarantee in connection with the Main Contract, and such change does not increases the Debtor’s obligation of payment under the L/C or letter of guarantee; or
6.2.3 Party B transfers the principal creditor’s rights.
6.3 During the valid period of this Contract, Party A shall, according to Party B’s requirements, provide balance sheet, statement of incomes, statement of cash flows and other financial statements, and accept Party B’s inspection and supervision on Party A’s production and operation activities and financial status.
6.4 Party A shall notify Party B in written form and implement all suretyship liabilities under this Contract thirty days prior to the following changes during the valid period of this Contract, including but not limited to contracting, lease, custody, reorganization of assets, reconstruction of debts, transformation of equity system, joint operation, business combination (or merger), division, paid transfer of property, joint investment (or cooperation), reduce of registered capital, or filing for winding-up, filing for dissolution (or cancellation), filing for reorganization, mediation and bankruptcy, or change of self system or legal status.
6.5 During the valid period of this Contract, Party A shall notify Party B in written form thirty days prior to the following changes when it is announced winding-up, is announced closed, is announced dissolved (cancelled), is filed reorganization or bankruptcy, or changes self system and legal status, or has any other change which is enough to endanger Party A’s normal operation and lose the guarantee ability.
6.6 If Party A changes Party A’s address, name or legal representative, Party A shall notify Party B in written form within seven days after such change.
6.7 If the loan under the Main Contract is used for borrowing or repaying, Party A is willing to bear suretyship liability.
6.8 Party A shall sign in timely various notices posted or served by other means by Party B.
6.9 In case of any one of the following circumstances occurring to the purchaser’s financing under a L/C, an import L/C and import bill advance/ import refinance businesses, Party A shall have the obligation of incontestable guaranty of suretyship. Party A shall not, for any payment obligation under the letter of credit specified by the judicial authority or the administrative authority, issue stop payment order or restraining order, or take measures to seal, detain and freeze relevant property of the letter of credit or take other similar measures to present exemption or defense:
6.9.1 the person designated or authorized by Party B has favorably paid according to Party B’s order;
6.9.2 Party B or the person designated or authorized by Party B has favorably issued a due payment confirmation for the loan under the domestic letter of credit or has favorably accepted the documents under the import letter of credit;
6.9.3 the confirming bank of the L/C has favorably performed the obligation of payment;
6.9.4 the negotiation bank of the L/C has favorably made negotiation.
6.10 Under shipping guarantee, endorsement of bill of lading and authorized withdrawal, Party A shall not present exemption or defense because the Debtor of the Main Contract refuses payment of the relevant L/C.
Article 7 Party B’s Rights and Obligations
7.1 Party B is entitled to demand Party A at any time to provide the financial reports, financial statements or other data reflecting Party A’s operation conditions and credit status.
7.2 If Party A does not perform its liability hereunder according to the stipulations of this Contract, Party B shall have the right to deduct Party A’s accounts payable directly from an account opened by Party A with any banking institution of Huaxia Bank and Party B shall notify Party A timely. If the account currency is different from the currency of the principal creditor’s rights when Party B makes deduction from Party A’s account, translation shall be made according to the foreign exchange rate issued by Party B on the date of deduction. Should RMB be translated into a foreign currency, translation shall be made according to the selling price of the foreign currency; should a foreign currency be translated into RMB, translation shall be made according to the buying price of the foreign currency.
7.3 When Party B and the Debtor of the Main Contract concludes and signs a specific business contract (or agreement), Party A may not be notified.
Article 8 Liability for Breach of Contract
When this Contract becomes effective, Party A and Party B shall perform the obligations specified in this Contract. Any party which fails to wholly or partly perform its obligations specified herein or violates its representations, warranties and commitments made hereunder shall undertake relevant liabilities for breach of contract and make compensation for losses caused to the other party.
Article 9 Effectiveness of Contract
9.1 This Contract shall enter into force as of the date of signature of both parties.
9.2 The validity of this Contract shall be independent of the Main Contract and may not be affected by the invalidity of the Main Contract. If the Main Contract is confirmed as invalid, Party A shall assume joint and several suretyship liability for the debts arising from the Debtor’s return of property or compensation for losses.
Article 10 Transfer, Change and Cancellation of Contract
10.1 Party A or Party B shall not change or cancel this Contract without permission after the effectiveness of this Contract.
10.2 Party B may transfer the Principal Creditor’s Rights to a third person within the valid period of this Contract without obtaining Party A’s consent, and Party A shall continue to bear joint and several suretyship liability within the original scope of suretyship.
10.3 Without Party B’s written consent, Party A shall not transfer all or part of its rights or obligations under this Contract.
Article 11 Confidentiality
Party A or Party B shall bear the obligation of confidentiality for the other party’s business secret, contractual clauses and other information related to interest acquired during the signature and execution processes of this Contract, but shall not disclose the aforesaid information to a third party without the other party’s consent, except otherwise prescribed by laws, regulations and regulatory policies.
Article 12 Governing Laws and Dispute Settlement
12.1 This Contract applies to the laws of the People's Republic of China.
12.2 Any and all disputes arising from the execution of this Contract between Party A and Party B shall be settled through consultation; where consultation fails, both parties agree to settle the dispute according to the following method:
To bring a case to the local people’s court
at the domicile of Party B
;
To apply
/
Arbitration Committee for arbitration.
12.3 If the method selected above for dispute settlement is different from the method for dispute settlement under the Main Contract, the method for dispute settlement under the Main Contract shall prevail.
Article 13 Notice and Service
During the valid period of this Contract, if Party A changes its information first given in this Contract without notifying Party B in written form, including name of Party A’s legal person, legal representative, domicile and telephone number, all documents that Party B sends to Party A according to Party A’s information given in this Contract shall be deemed as having been served.
Article 14 Supplementary Provisions
14.1 Party A authorizes Party B to, in accordance with relevant laws and regulations, or other regulatory documents or requirements of financial regulators, provide the relevant information of the Contract and other relevant information for the credit information basic database of the People’s Bank of China or other credit database established by law for the qualified institutions or individuals to search and use. Party A also authorizes Party B to, for the purpose of the conclusion and performance of the Contract, search Party B’s relevant information through the credit information basic database of the People’s Bank of China or other credit database established by law.
14.2 Other provisions agreed by both parties:
14.3 If selection is made in □ under this Contract, this clause shall apply if √ is ticked in □ but shall not apply if × is given in □.
14.4 This Contract shall be provided for Party A holding one original, Party B holding two originals and the Debtor holding one original, which shall be equally authentic.
14.5 Annexes of this Contract shall be deemed as an integral part of this Contract and have the same equal legal force as this Contract.
14.6 Party B has take reasonable measures to remind Party A to pay attention to the clauses of exempting or restricting Party B’s responsibilities and, according to Party A’s requirements, has given full explanation of relevant clauses. Party A and Party B have no objection to the understanding of the contents of all clauses of this Contract.
(The remainder of this page is intentionally left blank.)
Page of signature (the remainder of this page is intentionally left blank.)
Party A: | (Seal) |
Shenzhen Highpower Technology Co., Ltd. (Seal) | |
Legal Representative: | |
(Or Authorized Agent): | (Signature) |
Party B: | (Seal) |
Huaxia Bank Co., Ltd. Shenzhen Great China Sub-branch (Seal) | |
Legal Representative / Main Principal: | |
(Or Authorized Agent) | (Signature or Seal) |
Exhibit 10.26
Comprehensive Credit Line Contract
Contract No.: H.X.H.F.Z.Z. No. 20171026001
Party A: Guangdong Huaxing Bank Co., Ltd. Huizhou Branch
Address: 1/F and 2/F, Qiangli Business Building, No. 6, Yanda Avenue, Huicheng District, Huizhou City
Tel.: 0752-3128618 Fax: 0752-3128615
Person in Charge: Meng Yi Position: President
Party B: Huizhou Highpower Technology Co. Ltd.
Address: Xinhu Industrial Development Area, Ma’an Town, Huicheng District, Huizhou City
Tel.: Fax:
Legal Representative: Pan Dangyu Position: President
In accordance with relevant laws, Party A and Party B make and enter into this Contract upon unanimity through consultation and both parties are willing to abide by all terms and conditions of this Contract .
Article 1 Contents of Comprehensive Credit Line
1. Contents of comprehensive credit line:
(Equivalent to) RMB (in words) sixty million only .
Exchange rates of currencies other than RMB shall be converted according to the foreign exchange rate published by Party A when a specific business actually occurs.
2. Term of comprehensive credit line: from October 26, 2017 to September 27, 2018 . Use method during this period:
þ Comprehensive credit line may be revolved. The revolved method, amount and term shall be determined by Party A and Party B through consultation. However, the sum of all outstanding credit line balances used shall not exceed the amount of comprehensive credit line.
□ Comprehensive credit line may not be revolved.
The commencement date of each specific business term under the credit line shall be within the credit term. The expiry date whether in or out of the credit term shall be specified in a specific business contract.
If Party A does not issue any credit line to Party B prior to March 27, 2018 , the comprehensive credit line shall be automatically terminated.
Article 2 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 liabilities) under the line, and the expenses for realization of the creditor’s right (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:
1. / (Credit Transferee), amount: (equivalent to) / (currency) (in words) / ;
2. / (Credit Transferee), amount: (equivalent to) / (currency) (in words) / ;
3. / (Credit Transferee), amount: (equivalent to) / (currency) (in words) / ;
4. /
Article 3 This Contract is formulated under the laws of the People’s Republic of China and it shall apply to the laws of the People’s Republic of China. In case of any dispute during the execution of this Contract, both parties shall make settlement through consultation or mediation; where a dispute cannot be settled through consultation or mediation, it shall be settled according to the method set forth in the following 1 :
1. to initiate a lawsuit in the people’s court at the location where Party A is located.
2. to apply the / arbitration commission for arbitration.
3. / .
Article 4 Enforcement of Notarization
□ Both Parties agree to handle enforcement of notarization for this Contract.
If Party B does not perform or does not completely perform its obligations specified herein after enforcement of notarization of this Contract is handled by both parties, Party A shall have the right to apply to the original notary public for an enforcement certificate, and holding the original notarial certificate and the enforcement certificate, apply to 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.
þ No enforcement of notarization shall be handled for this Contract.
Article 5 Other provisions agreed by Party
A and Party B:
/
Article 6 This Contract is made out in two (2) originals for Party A holding one (1) , and Party B, / , / and / each holding one (1) , which shall be equally authentic.
Article 7 Comprehensive Credit Granting Method
The credit granting method of comprehensive 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.
The specific credit granting method shall be subject to the specific business contract concluded and signed by both parties.
Article 8 Use of Comprehensive Credit Line
When Party B needs to use the comprehensive credit line, it must submit an application. Upon examination and approval by Party A, both parties shall enter into a specific business contract.
Article 9 Representations, Warranties and Commitments of Party B
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.
2. Party B has lawful power, right and authorization to sign, deliver and execute this Contract. This Contract constitutes an agreement binging upon Party B and shall be executed by Party B according to the terms and conditions of this Contract.
3. Party B ensures that all the application materials provided to Party A are true, complete, legitimate and effective and exclude any false record, misleading statement or major omission.
4. Party B hereby undertakes to perform its all obligations hereunder by ways of goodwill. Without Party A’s written consent in advance, Party B may not conduct any behavior (including those which should be done and which may not be done) which may endanger the realization of claim under this Contract.
5. Party B hereby makes commitments, 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 ten 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.
6. Party B hereby confirms that it has carefully read, fully known and understood all terms and conditions of this Contract and conclusion of this Contract is the representation of its true meaning. 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.
Article 10 Special provisions on granting to group customers and affiliated transactions
I. A group customer means 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.
5II. 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).
Article 11 Event of Default and Liability for Breach of Contract
I. Event of default
Under any one of the circumstances, an event of default shall be deemed as having occurred:
1. Party B violates agreed obligations under this Contract or any specific business contract during the validity of this Contract, or Party B expressly indicates or indicates through its acts that it does not perform the agreed obligations under this Contract or any specific business contract during the validity of this Contract;
2.The relevant certificates and documents submitted by Party B to Party A or the representations, warranties and commitments made by Party B are not true, not accurate or not complete, or have false record, misleading statement or major omission;
3. Party B conceals some important true information, or fails to coordinate Party A’s investigation, examination and inspection;
4. Party B changes the purpose of the loan funds without authorization, or conducts illegal transactions by use of the loan or bank loans;
5. Party B violates any other similar contract (including but not limited to credit contract, loan contract and guarantee contract) concluded and signed with Party A or with any third party, or debt securities issued by Party B, or any dispute arising from such contract or securities is under litigation or arbitration;
6. 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 canceled;
7. Party B has any one of the following behaviors, being negligent in managing and claiming the creditor’s right 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 Party B's affiliated parties), including but not limited to pledge or discount of the notes receivable and other claims without actual trading background;
9. Party B evades bank claims through affiliated transactions or by other means;
10. Party B's operation conditions go into major problems, such as deterioration of financial conditions, serious financial losses, loss of assets (including but not limited to loss of assets caused due to external guarantee) or other financial crisis;
11. Party B has any illegal management behavior, and is subject to administrative punishment or criminal sanction, or is being investigated by relevant authorities, or is likely to be subject to administrative punishment or criminal sanction;
12. Party B has the following changes, such as division, consolidation, major merger, acquisition and reconstruction, disposal of major assets, reduction of capital, liquidation, reorganization, being announced bankruptcy or being dissolved;
13. Party B's controlling shareholder or actual controller is changed that Party A thinks having affected or likely to affect realization of creditor's rights hereunder; or there is any significant event of Party B's controlling shareholder, actual controller, legal representative or senior management personnel, including but not limited to due to illegal management behavior, subject to administrative punishment or criminal sanction, or being investigated by relevant authorities, or likely to be subject to administrative punishment or criminal sanction, or is involved in a lawsuit or arbitration case, or serious deterioration of financial conditions, being announced bankruptcy or dissolved;
14. There is adverse change to the industry where Party B is located, which Party A thinks having affected or likely to affect realization of creditor's rights hereunder;
15. Party B fails to handle settlement or deposit or relevant business with Party A according to provisions;
16. Other circumstances related to Party B which endanger or likely to endanger realization of creditor’s right hereunder.
II. Liability for breach of contract
In case of any default event as set forth in Clause I of this Article, Party A shall have the right to take one or more of the following actions:
1. to adjust, cancel or terminate the comprehensive credit line hereunder, or to adjust the valid period of the line;
2. to announce immediate maturity of all or part of Party B's debts hereunder; to demand Party B to immediately repay all or part of the credit line used;
3. to demand Party B to add security or take other measures to ensure Party A’s lawful rights and interests not infringed;
4. 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;
5. to exercise the suretyship, ask the surety to perform suretyship liability, or realize claim through disposal of the mortgaged property and/or pledged property.
Article 12 Anti-corruption and Anti-bribery
1. Both parties of this Contract know and are willing to strictly abide by the anti-corruption and anti-bribery laws and regulations of the People's Republic of China.
2. One party hereto or the agent of one party hereto shall not give or promise to give non-agreed unjust benefits of any form, including but not limited to cash, negotiable securities, shopping card, gifts and tourism, to the other party's main principal, agent or other related personnel, nor ask for unjust benefits of any form from the other party's main principal, agent or other related personnel. Otherwise, the party concerned shall make compensation for the other party's all losses arising therefrom once it is detected.
3. “Other affiliated personnel” referred to in sub-clause 2 of this Article means the personnel directly or indirectly related to the business hereunder other than the other party's main principal and agent, including but not limited to the family members and friends of the other party's main principal and agent.
Article 13 Confirmation of Address for Service
Party A and Party B agree as follows on the service address and legal consequences of various notices, agreements and documents concerned herein, and relevant documents and legal documents of disputes hereunder:
1. Party A confirms that its effective address for service is: 1/F and 2/F, Qiangli Business Building, No. 6, Yanda Avenue, Huicheng District, Huizhou City.
2. Party B confirms that its effective address for service is: Xinhu Industrial Development Area, Ma’an Town, Huicheng District, Huizhou City.
3. The scope of use of such address for service shall include service of various notices, agreements and documents during litigation between both parties, and service of relevant documents and legal documents of disputes hereunder, including service during first instance, second instance, re-instance and executive procedures after the dispute enters civil procedures.
4. Should Party A's address for service be changed, Party A shall perform the duty of notification and notify Party B in written form; should Party B's address for service be changed, Party B shall perform the duty of notification and notify Party A in written form.
If one party fails to perform the duty of notification pursuant to the preceding paragraph, the address for service confirmed by both parties shall be deemed as the effective address for service. If any legal document fails to be actually received by the party concerned after it is posted because the service for address provided or confirmed is untrue or the party concerned does not perform the duty of notification to the other party and the court after change of the address for service, or the party concerned or its designated person refuses to sign in the document, the date of return of the document shall be deemed as the date of service; if sent directly, the date when the person serving the document records in the service receipt on the spot shall be deemed as the date of service; when the duty of notification on change of the address for service is performed, the address for service changed shall be deemed as the effective address for service. The court may send a legal document directly to the address for service specified by both parties in this Contract, and the document shall be deemed as being served even if one party fails to receive the legal document posted by the court.
5. After a dispute enters the civil procedures, if the address confirmed by any party responding the lawsuit and given in the letter of confirmation of address for service directly submitted to the court is different from that confirmed prior to this lawsuit, the address for service submitted to and confirmed by the court shall be adopted.
Article 14 This Contract shall come into force upon the signature of all the parties (signed or sealed by the authorized signatories and affixed with official seal).
Seal of Party A: Guangdong Huaxing Bank Co., Ltd. Huizhou Branch (Seal)
Signature of Person in Charge or Authorized Agent:
Oct. 26, 2017
Seal of Party B: Huizhou Highpower Technology Co. Ltd. (Seal)
Signature of Legal Representative or Authorized Agent: Pan Dangyu (Signature)
Oct. 26, 2017
Exhibit 10.26(a)
Maximum Suretyship Guaranty Contract
Contract No.: H.X.H.F.E.B.Z. No. 20171026002
Party A (Creditor of the Main Contract): Guangdong Huaxing Bank Co., Ltd. Huizhou Branch
Address: 1/F and 2/F, Qiangli Business Building, No. 6, Yanda Avenue, Huicheng District, Huizhou City
Tel.: 0752-3128618 Fax: 0752-3128615
Person in Charge: Meng Yi Position: President
Party B (Surety): Pan Dangyu
Certificate Type *: ** Certificate No. *: **
(Items expressed with * may not be filled if Party B is an entity)
Address: Xinhu Industrial Development Area, Ma’an Town, Huicheng District, Huizhou City
Tel.: Fax:
Legal Representative **: Pan Dangyu Position **: President
(Items expressed with ** may not be filled if Party B is an individual)
In order to ensure the execution of the Contract (hereinafter referred to as the Main Contract) between Party A and Huizhou Highpower Technology Co. Ltd. (hereinafter referred to as the Debtor), Party B is willing to provide Party A with suretyship of joint and several liability as the Surety of the Debtor of the Main Contract. IN WITNESS WHEREOF, Party A and Party B hereby make and enter into this Contract upon consensus through consultation. Both Parties are willing to abide by the following terms and conditions.
Article 1 Scope of Suretyship Guaranty
The scope of guaranty hereunder (tick "√" in front of the option)
þ Principal, interest, compound interest and default interest of all debts (including contingent liabilities), and expenses for realization of creditor's right bearable by the Debtor under the Comprehensive Credit Line Contract of H.X. H.F.Z. Z. No. 20171026001 . The maximum amount (balance) of the principal of these debts shall be (equivalent to) RMB (in words) sixty million only .
□ (Equivalent to) currency (in words) of the total principal (equivalent to) currency (in words) of all debts (including contingent liabilities) and corresponding interest, compound interest and default interest, and expenses for realization of creditor's right bearable by the Debtor under the Contract of H.X. Z. No. . Party A shall have the right to request Party B to bear guaranty liability for the balance of debts within the scope of guaranty above mentioned before the debts under the Main Contract are fully repaid.
□ Execution of all debts under the Main Contract concluded and signed by and between the Debtor and Party A during the period from to . The date of signature of the Main Contract shall be within the period above mentioned, but the execution period of the Main Contract shall not be limited to the period above mentioned. The scope of suretyship guaranty of Party B shall include the principal, interest, compound interest and default interest of the Debtor's all debts (including contingent liabilities), and the expenses for realization of creditor's right under the Main Contract. The maximum amount (balance) of the principal of the aforesaid debts shall be (equivalent to) currency (in words) .
□ | |
Interest, default interest and compound interest shall be calculated in accordance with the Main Contract and shall be calculated until the debts are fully repaid. The expenses for realization of creditor's right shall include but not be limited to announcement cost, service fee, attorney fee, legal cost, traveling expenses, appraisal cost, auction expenses, property preservation cost and enforcement fee.
Exchange rates of currencies other than RMB shall be converted according to the foreign exchange rate published by Party A when a specific business actually occurs.
Article 2 Guaranty Period
The guaranty period hereunder (tick "√" in front of the option):
þ A period from the date of effectiveness of this Contract to two years after the date of expiry of the debt performance period of various specific credits under the Main Contract. The guaranty period of each specific credit shall be calculated independently. In case of expansion of a specific credit term, the guaranty period shall be extended to two years after the expiration of the extended period.
□ | |
□ If Party A transfers its creditor's right to a third party during the suretyship period, Party B hereby agrees to continuously bear guaranty liability within the scope of the original suretyship.
Article 3If the Debtor transfers its credit line granted by Party A to a third party for use, Party B agrees to bear liability of suretyship guaranty for the transferred part according to the stipulations of this Contract. The specific transferred object and amount is as follows:
1. / (Credit Transferee), amount: (equivalent to) / (currency) (in words) / ;
2. / (Credit Transferee), amount: (equivalent to) / (currency) (in words) / ;
3. / (Credit Transferee), amount: (equivalent to) / (currency) (in words) / ;
4. | . |
Article 4 Other provisions agreed by Party A and Party B: | / |
. |
Article 5 This Contract is made out in three (3) originals for Party A holding one (1) , and Party B, the Debtor, /_ , __/__ and / _ each holding one (1) , which shall be equally authentic.
Article 6 Enforcement of Notarization
□ Both Parties agree to handle enforcement of notarization for this Contract.
If Party B does not perform or does not completely perform its obligations specified herein after enforcement of notarization of this Contract is handled by both parties, Party A shall have the right to apply to the original notary public for an enforcement certificate, and holding the original notarial certificate and the enforcement certificate, apply to 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.
þ No enforcement of notarization shall be handled for this Contract.
Article 7 Liability of Suretyship
Party B shall bear joint and several liability of repayment for the principal, interest, compound interest and default interest of all debts (including contingent liabilities), and the expenses for realization of creditor's right within the scope of suretyship. If the Debtor fails to perform the obligation of repayment or has other default event agreed in the Main Contract at expiration of this Contract (including expiration and early expiration of this Contract), Party A may claim the Debtor for repayment or directly claim Party B for repayment. Party B hereby irrevocably authorizes Party A that Party A may deduct the amount of the due creditor's right directly from Party B's bank account opened with Party A if the Debtor fails to perform the obligation of repayment at expiration of this Contract (including expiration and early expiration of this Contract).
No matter whether the Debtor or a third person has provided property security (mortgage/pledge), Party A shall have the right to request Party B to bear suretyship liability, without disposal of the guaranteed property in advance.
Article 8 The suretyship hereunder shall be an independent suretyship, without being affected by the guarantees provided by other guarantors.
Article 9 The suretyship hereunder shall be an irrevocable suretyship. It may not be affected by any agreement or document between the Debtor and any entity, nor be changed due to various situations of the Debtor, such as bankruptcy, insolvency, loss of enterprise qualifications or change of organizations and articles of association.
Article 10 Event of Default and Liability for Breach of Contract
I. Event of default
Under any one of the circumstances, an event of default shall be deemed as having occurred:
1. Party B violates its obligations performable under this Contract, or Party B expressly indicates or indicates through its acts that it does not perform its obligations under this Contract;
2.The relevant certificates and documents submitted by Party B to Party A or the representations, warranties and commitments made by Party B are not true, not accurate or not complete, or have false record, misleading statement or major omission;
3. Party B conceals some important true information, or fails to coordinate Party A’s investigation, examination and inspection;
4. Party B 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;
5. Party B violates any other similar contract (including but not limited to credit contract, loan contract and guarantee contract) concluded and signed with Party A or with any third party, or debt securities issued by Party B, or any dispute arising from such contract or securities is under litigation or arbitration;
6. The suretyship is invalid or cancelled;
7. The debt under the Main Contract is matured or accelerated, and the creditor’s right of Party A is not fully or partially repaid;
8. Party B evades bank claims through affiliated transactions or by other means;
9. If Party B is an entity:
9.1 Party B's operation conditions go into major problems, such as deterioration of financial conditions, serious financial losses, loss of assets (including but not limited to loss of assets caused due to external guarantee) or other financial crisis;
9.2 Party B has any illegal management behavior, and is subject to administrative punishment or criminal sanction, or is being investigated by relevant authorities, or is likely to be subject to administrative punishment or criminal sanction;
9.3 Party B has the following changes, such as division, consolidation, major merger, acquisition and reconstruction, disposal of major assets, reduction of capital, liquidation, reorganization, being announced bankruptcy or being dissolved;
9.4 Party B's controlling shareholder or actual controller is changed that Party A thinks having affected or likely to affect realization of creditor's rights hereunder; or there is any significant event of Party B's controlling shareholder, actual controller, legal representative or senior management personnel, including but not limited to due to illegal management behavior, subject to administrative punishment or criminal sanction, or being investigated by relevant authorities, or likely to be subject to administrative punishment or criminal sanction, or is involved in a lawsuit or arbitration case, or serious deterioration of financial conditions, being announced bankruptcy or dissolved;
9.5 There is adverse change to the industry where Party B is located, which Party A thinks having affected or likely to affect realization of creditor's right under the Main Contract and/or this Contract;
10. If Party B is an individual:
10.1 Party B has any change, such as disability, unemployment, removal, job change or business change, that Party A thinks having affected or likely to affect Party B’s performance of guaranty liability;
10.2 Party B is investigated for criminal responsibility by law, or any other enforcement action is taken to the Credit Applicant by law or the relevant authorities take actions to restrict Party B's some right, that Party A thinks having affected or likely to affect Party B’s performance of guaranty liability;
10.3 Party B’s successor or legatee waives succession or legacy or refuses to perform guaranty liability after acceptance of succession or legacy;
11. Party B has any other situations that Party A thinks having affected or likely to affect Party B’s performance of guaranty liability.
II. Liability for breach of contract
In case of any default event as set forth in Clause I of this Article, Party A shall have the right to take one or more of the following actions:
1. to request Party B to bear suretyship liability and have the right to deduct the principal, interest, compound interest, default interest and expenses of all debts (including contingent liabilities) under the Main Contract directly from Party B's account, including but not limited to the expenses for credit investigation, inspection and notarization related to this Contract, and the attorney fee, legal cost, arbitration fee, traveling expenses, announcement cost, service fee, execution fee and other relevant expenses of Party A for realization of creditor's right;
2. to request Party B to provide new security complying with Party A's requirements for the creditor's right under the Main Contract, including but not limited to provision of mortgaged property and pledged property;
3. to claim Party B for compensation for Party A's all losses;
4. to claim Party B's Debtor for the right of subrogation by law; Party B shall, according to Party A's requirements, provide all necessary coordination and assistance and bear Party A's expenses for exercising the right of subrogation;
5. to appeal to the people's 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 Party A's all costs and expenses arising therefrom shall be borne by Party B;
6. Other remedial measures that Party A has the right to claim according to law and agreement.
Article 11 In the event that the Main Contract or a specific business contract under the Main Contract becomes invalid or partially invalid by law, Party A shall also have the right to request the Debtor of the Main Contract to return the agreed credit principal and interest and other relevant funds in accordance with relevant laws and regulations. In this case, the validity of this Contract shall not be affected, and Party B shall also bear guaranty liability for the repayment liability of the Debtor of the Main Contract according to the conditions specified herein.
Article 12 Representations, Warranties and Commitments of Party B
1. Party B has lawful power, right and authorization to sign, deliver and execute this Contract. This Contract constitutes an agreement binging upon Party B and shall be executed by Party B according to the terms and conditions of this Contract.
2. If Party B is a company, it shall be 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. Party B ensures that all the application materials provided to Party A are true, complete, legitimate and effective and exclude any false record, misleading statement or major omission.
4. Party B hereby undertakes to perform its all obligations hereunder by ways of goodwill. Without Party A’s written consent in advance, Party B may not conduct any behavior (including those which should be done and which may not be done) which may endanger the realization of claim under this Contract.
5. Party B hereby makes commitments, if Party B changes its domicile, mailing address, telephone number and employment conditions (or business scope, legal representative) or other relevant items, it shall notify Party A in writing within ten 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 to Party B.
6. Party B hereby confirms that it has carefully read, fully known and understood all terms and conditions of this Contract and conclusion of this Contract is the representation of its true meaning.
Article 13 Amendment to Contract
1. This Contract may be amended or cancelled upon consensus through consultation between both parties hereto. The agreement on amendment or cancellation of this Contract shall be made in written form.
2. When the Main Contract is amended, Party A shall timely solicit Party B's agreement in writing. Upon Party B's agreement, Party B shall bear liability of joint and several suretyship for the debts of the amended Main Contract . However, the Debtor's debts are lightened (including but not limited to reduce of the amount or shortening of the term of debts under the Main Contract) due to amendment to the Main Contract, Party B shall be deemed as having agreed such amendment and, without obtaining Party B's agreement, Party B shall continue to bear suretyship liability for the debts of the amended Main Contract.
Article 14 Anti-corruption and Anti-bribery
1. Both parties of this Contract know and are willing to strictly abide by the anti-corruption and anti-bribery laws and regulations of the People's Republic of China.
2. One party hereto or the agent of one party hereto shall not give or promise to give non-agreed unjust benefits of any form, including but not limited to cash, negotiable securities, shopping card, gifts and tourism, to the other party's main principal, agent or other related personnel, nor ask for unjust benefits of any form from the other party's main principal, agent or other related personnel. Otherwise, the party concerned shall make compensation for the other party's all losses arising therefrom once it is detected.
3. “Other affiliated personnel” referred to in sub-clause 2 of this Article means the personnel directly or indirectly related to the business hereunder other than the other party's main principal and agent, including but not limited to the family members and friends of the other party's main principal and agent.
Article 15 Confirmation of Address for Service
Party A and Party B agree as follows on the service address and legal consequences of various notices, agreements and documents concerned herein, and relevant documents and legal documents of disputes hereunder:
1. Party A confirms that its effective address for service is: 1/F and 2/F, Qiangli Business Building, No. 6, Yanda Avenue, Huicheng District, Huizhou City.
2. Party B confirms that its effective address for service is: Xinhu Industrial Development Area, Ma’an Town, Huicheng District, Huizhou City
3. The scope of use of such address for service shall include service of various notices, agreements and documents during litigation between both parties, and service of relevant documents and legal documents of disputes hereunder, including service during first instance, second instance, re-instance and executive procedures after the dispute enters civil procedures.
4. Should Party A's address for service be changed, Party A shall perform the duty of notification and notify Party B in written form; should Party B's address for service be changed, Party B shall perform the duty of notification and notify Party A in written form.
If one party fails to perform the duty of notification pursuant to the preceding paragraph, the address for service confirmed by both parties shall be deemed as the effective address for service. If any legal document fails to be actually received by the party concerned after it is posted because the service for address provided or confirmed is untrue or the party concerned does not perform the duty of notification to the other party and the court after change of the address for service, or the party concerned or its designated person refuses to sign in the document, the date of return of the document shall be deemed as the date of service; if sent directly, the date when the person serving the document records in the service receipt on the spot shall be deemed as the date of service; when the duty of notification on change of the address for service is performed, the address for service changed shall be deemed as the effective address for service. The court may send a legal document directly to the address for service specified by both parties in this Contract, and the document shall be deemed as being served even if one party fails to receive the legal document posted by the court.
5. After a dispute enters the civil procedures, if the address confirmed by any party responding the lawsuit and given in the letter of confirmation of address for service directly submitted to the court is different from that confirmed prior to this lawsuit, the address for service submitted to and confirmed by the court shall be adopted.
Article 16 During the valid period of this Contract, Party A’s tolerance or grace imposed on or Party A’s delay in the execution of its any right under this Contract for Party B’s breach or delay shall not damage, impact or restrict Party A’s all other rights enjoyable as a creditor in accordance with this Contract and relevant laws, and shall not be deemed as Party A’s permit or acceptance of any breach of this Contract nor be deemed as Party A’s waiver of the right to take actions for Party B's current or future behaviors of breach.
Article 17 Applicable Laws and Dispute Settlement
1. This Contract is formulated under the laws of the People’s Republic of China and it shall apply to the laws of the People’s Republic of China.
2. Any and all disputes arising from this Contract shall be settled according to the method specified in the Main Contract.
Article 18 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).
Seal of Party A: Guangdong Huaxing Bank Co., Ltd. Huizhou Branch (Seal)
Signature of Person in Charge or Authorized Agent:
Oct. 26, 2017
Seal of Party B (Party B is an entity): | Party B (Party B is an individual): |
Signature of Legal Representative or Authorized Agent: | or Signature of Authorized Agent: |
(Signature) | |
Oct. 26, 2017 | Date: |
Exhibit 10.26(b)
Maximum Suretyship Guaranty Contract
Contract No.: H.X.H.F.E.B.Z. No. 20171026001
Party A (Creditor of the Main Contract): Guangdong Huaxing Bank Co., Ltd. Huizhou Branch
Address: 1/F and 2/F, Qiangli Business Building, No. 6, Yanda Avenue, Huicheng District, Huizhou City
Tel.: 0752-3128618 Fax: 0752-3128615
Person in Charge: Meng Yi Position: President
Party B (Surety): Shenzhen Highpower Technology Co., Ltd.
Certificate Type *: _______________ Certificate No. *:_______________
(Items expressed with * may not be filled if Party B is an entity)
Address: Bldg. 1, No. 68, Xinsha Road, Pinghu Street, Longgang District, Shenzhen
Tel.: _______________ Fax: _______________
Legal Representative **: Pan Dangyu Position **: President
(Items expressed with ** may not be filled if Party B is an individual)
In order to ensure the execution of the Contract (hereinafter referred to as the Main Contract) between Party A and Huizhou Highpower Technology Co. Ltd. (hereinafter referred to as the Debtor), Party B is willing to provide Party A with suretyship of joint and several liability as the Surety of the Debtor of the Main Contract. IN WITNESS WHEREOF, Party A and Party B hereby make and enter into this Contract upon consensus through consultation. Both Parties are willing to abide by the following terms and conditions.
Article 1 Scope of Suretyship Guaranty
The scope of guaranty hereunder (tick "√" in front of the option)
þ Principal, interest, compound interest and default interest of all debts (including contingent liabilities), and expenses for realization of creditor's right bearable by the Debtor under the Comprehensive Credit Line Contract of H.X. H.F.Z. Z. No. 20171026001 . The maximum amount (balance) of the principal of these debts shall be (equivalent to) RMB (in words) sixty million only .
□ (Equivalent to) __________currency (in words) __________of the total principal (equivalent to) currency (in words) __________of all debts (including contingent liabilities) and corresponding interest, compound interest and default interest, and expenses for realization of creditor's right bearable by the Debtor under the __________ Contract of H.X. __________Z. No. __________. Party A shall have the right to request Party B to bear guaranty liability for the balance of debts within the scope of guaranty above mentioned before the debts under the Main Contract are fully repaid.
□ Execution of all debts under the Main Contract concluded and signed by and between the Debtor and Party A during the period from __________to __________. The date of signature of the Main Contract shall be within the period above mentioned, but the execution period of the Main Contract shall not be limited to the period above mentioned. The scope of suretyship guaranty of Party B shall include the principal, interest, compound interest and default interest of the Debtor's all debts (including contingent liabilities), and the expenses for realization of creditor's right under the Main Contract. The maximum amount (balance) of the principal of the aforesaid debts shall be (equivalent to) __________currency (in words) ________________.
□ | |
Interest, default interest and compound interest shall be calculated in accordance with the Main Contract and shall be calculated until the debts are fully repaid. The expenses for realization of creditor's right shall include but not be limited to announcement cost, service fee, attorney fee, legal cost, traveling expenses, appraisal cost, auction expenses, property preservation cost and enforcement fee.
Exchange rates of currencies other than RMB shall be converted according to the foreign exchange rate published by Party A when a specific business actually occurs.
Article 2 Guaranty Period
The guaranty period hereunder (tick "√" in front of the option):
þ A period from the date of effectiveness of this Contract to two years after the date of expiry of the debt performance period of various specific credits under the Main Contract. The guaranty period of each specific credit shall be calculated independently. In case of expansion of a specific credit term, the guaranty period shall be extended to two years after the expiration of the extended period.
□ | |
□ If Party A transfers its creditor's right to a third party during the suretyship period, Party B hereby agrees to continuously bear guaranty liability within the scope of the original suretyship.
Article 3If the Debtor transfers its credit line granted by Party A to a third party for use, Party B agrees to bear liability of suretyship guaranty for the transferred part according to the stipulations of this Contract. The specific transferred object and amount is as follows:
1. | / (Credit Transferee), amount: (equivalent to) / (currency) (in words) / ; |
2. | / (Credit Transferee), amount: (equivalent to) / (currency) (in words) / ; |
3. | / (Credit Transferee), amount: (equivalent to) / (currency) (in words) / ; |
4. | |
.
Article 4 Other provisions agreed by Party A and Party B: /
Article 5 This Contract is made out in three (3) originals for Party A holding one (1) , and Party B, the Debtor, / , / and / each holding one (1) , which shall be equally authentic.
Article 6 Enforcement of Notarization
□ Both Parties agree to handle enforcement of notarization for this Contract.
If Party B does not perform or does not completely perform its obligations specified herein after enforcement of notarization of this Contract is handled by both parties, Party A shall have the right to apply to the original notary public for an enforcement certificate, and holding the original notarial certificate and the enforcement certificate, apply to 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.
þ No enforcement of notarization shall be handled for this Contract.
Article 7 Liability of Suretyship
Party B shall bear joint and several liability of repayment for the principal, interest, compound interest and default interest of all debts (including contingent liabilities), and the expenses for realization of creditor's right within the scope of suretyship. If the Debtor fails to perform the obligation of repayment or has other default event agreed in the Main Contract at expiration of this Contract (including expiration and early expiration of this Contract), Party A may claim the Debtor for repayment or directly claim Party B for repayment. Party B hereby irrevocably authorizes Party A that Party A may deduct the amount of the due creditor's right directly from Party B's bank account opened with Party A if the Debtor fails to perform the obligation of repayment at expiration of this Contract (including expiration and early expiration of this Contract).
No matter whether the Debtor or a third person has provided property security (mortgage/pledge), Party A shall have the right to request Party B to bear suretyship liability, without disposal of the guaranteed property in advance.
Article 8 The suretyship hereunder shall be an independent suretyship, without being affected by the guarantees provided by other guarantors.
Article 9 The suretyship hereunder shall be an irrevocable suretyship. It may not be affected by any agreement or document between the Debtor and any entity, nor be changed due to various situations of the Debtor, such as bankruptcy, insolvency, loss of enterprise qualifications or change of organizations and articles of association.
Article 10 Event of Default and Liability for Breach of Contract
I. Event of default
Under any one of the circumstances, an event of default shall be deemed as having occurred:
1. Party B violates its obligations performable under this Contract, or Party B expressly indicates or indicates through its acts that it does not perform its obligations under this Contract;
2. The relevant certificates and documents submitted by Party B to Party A or the representations, warranties and commitments made by Party B are not true, not accurate or not complete, or have false record, misleading statement or major omission;
3. Party B conceals some important true information, or fails to coordinate Party A’s investigation, examination and inspection;
4. Party B 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;
5. Party B violates any other similar contract (including but not limited to credit contract, loan contract and guarantee contract) concluded and signed with Party A or with any third party, or debt securities issued by Party B, or any dispute arising from such contract or securities is under litigation or arbitration;
6. The suretyship is invalid or cancelled;
7. The debt under the Main Contract is matured or accelerated, and the creditor’s right of Party A is not fully or partially repaid;
8. Party B evades bank claims through affiliated transactions or by other means;
9. If Party B is an entity:
9.1 Party B's operation conditions go into major problems, such as deterioration of financial conditions, serious financial losses, loss of assets (including but not limited to loss of assets caused due to external guarantee) or other financial crisis;
9.2 Party B has any illegal management behavior, and is subject to administrative punishment or criminal sanction, or is being investigated by relevant authorities, or is likely to be subject to administrative punishment or criminal sanction;
9.3 Party B has the following changes, such as division, consolidation, major merger, acquisition and reconstruction, disposal of major assets, reduction of capital, liquidation, reorganization, being announced bankruptcy or being dissolved;
9.4 Party B's controlling shareholder or actual controller is changed that Party A thinks having affected or likely to affect realization of creditor's rights hereunder; or there is any significant event of Party B's controlling shareholder, actual controller, legal representative or senior management personnel, including but not limited to due to illegal management behavior, subject to administrative punishment or criminal sanction, or being investigated by relevant authorities, or likely to be subject to administrative punishment or criminal sanction, or is involved in a lawsuit or arbitration case, or serious deterioration of financial conditions, being announced bankruptcy or dissolved;
9.5 There is adverse change to the industry where Party B is located, which Party A thinks having affected or likely to affect realization of creditor's right under the Main Contract and/or this Contract;
10. If Party B is an individual:
10.1 Party B has any change, such as disability, unemployment, removal, job change or business change, that Party A thinks having affected or likely to affect Party B’s performance of guaranty liability;
10.2 Party B is investigated for criminal responsibility by law, or any other enforcement action is taken to the Credit Applicant by law or the relevant authorities take actions to restrict Party B's some right, that Party A thinks having affected or likely to affect Party B’s performance of guaranty liability;
10.3 Party B’s successor or legatee waives succession or legacy or refuses to perform guaranty liability after acceptance of succession or legacy;
11. Party B has any other situations that Party A thinks having affected or likely to affect Party B’s performance of guaranty liability.
II. Liability for breach of contract
In case of any default event as set forth in Clause I of this Article, Party A shall have the right to take one or more of the following actions:
1. to request Party B to bear suretyship liability and have the right to deduct the principal, interest, compound interest, default interest and expenses of all debts (including contingent liabilities) under the Main Contract directly from Party B's account, including but not limited to the expenses for credit investigation, inspection and notarization related to this Contract, and the attorney fee, legal cost, arbitration fee, traveling expenses, announcement cost, service fee, execution fee and other relevant expenses of Party A for realization of creditor's right;
2. to request Party B to provide new security complying with Party A's requirements for the creditor's right under the Main Contract, including but not limited to provision of mortgaged property and pledged property;
3. to claim Party B for compensation for Party A's all losses;
4. to claim Party B's Debtor for the right of subrogation by law; Party B shall, according to Party A's requirements, provide all necessary coordination and assistance and bear Party A's expenses for exercising the right of subrogation;
5. to appeal to the people's 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 Party A's all costs and expenses arising therefrom shall be borne by Party B;
6. Other remedial measures that Party A has the right to claim according to law and agreement.
Article 11 In the event that the Main Contract or a specific business contract under the Main Contract becomes invalid or partially invalid by law, Party A shall also have the right to request the Debtor of the Main Contract to return the agreed credit principal and interest and other relevant funds in accordance with relevant laws and regulations. In this case, the validity of this Contract shall not be affected, and Party B shall also bear guaranty liability for the repayment liability of the Debtor of the Main Contract according to the conditions specified herein.
Article 12 Representations, Warranties and Commitments of Party B
1. Party B has lawful power, right and authorization to sign, deliver and execute this Contract. This Contract constitutes an agreement binging upon Party B and shall be executed by Party B according to the terms and conditions of this Contract.
2. If Party B is a company, it shall be 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. Party B ensures that all the application materials provided to Party A are true, complete, legitimate and effective and exclude any false record, misleading statement or major omission.
4. Party B hereby undertakes to perform its all obligations hereunder by ways of goodwill. Without Party A’s written consent in advance, Party B may not conduct any behavior (including those which should be done and which may not be done) which may endanger the realization of claim under this Contract.
5. Party B hereby makes commitments, if Party B changes its domicile, mailing address, telephone number and employment conditions (or business scope, legal representative) or other relevant items, it shall notify Party A in writing within ten 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 to Party B.
6. Party B hereby confirms that it has carefully read, fully known and understood all terms and conditions of this Contract and conclusion of this Contract is the representation of its true meaning.
Article 13 Amendment to Contract
1. This Contract may be amended or cancelled upon consensus through consultation between both parties hereto. The agreement on amendment or cancellation of this Contract shall be made in written form.
2. When the Main Contract is amended, Party A shall timely solicit Party B's agreement in writing. Upon Party B's agreement, Party B shall bear liability of joint and several suretyship for the debts of the amended Main Contract . However, the Debtor's debts are lightened (including but not limited to reduce of the amount or shortening of the term of debts under the Main Contract) due to amendment to the Main Contract, Party B shall be deemed as having agreed such amendment and, without obtaining Party B's agreement, Party B shall continue to bear suretyship liability for the debts of the amended Main Contract.
Article 14 Anti-corruption and Anti-bribery
1. Both parties of this Contract know and are willing to strictly abide by the anti-corruption and anti-bribery laws and regulations of the People's Republic of China.
2. One party hereto or the agent of one party hereto shall not give or promise to give non-agreed unjust benefits of any form, including but not limited to cash, negotiable securities, shopping card, gifts and tourism, to the other party's main principal, agent or other related personnel, nor ask for unjust benefits of any form from the other party's main principal, agent or other related personnel. Otherwise, the party concerned shall make compensation for the other party's all losses arising therefrom once it is detected.
3. “Other affiliated personnel” referred to in sub-clause 2 of this Article means the personnel directly or indirectly related to the business hereunder other than the other party's main principal and agent, including but not limited to the family members and friends of the other party's main principal and agent.
Article 15 Confirmation of Address for Service
Party A and Party B agree as follows on the service address and legal consequences of various notices, agreements and documents concerned herein, and relevant documents and legal documents of disputes hereunder:
1. Party A confirms that its effective address for service is: 1/F and 2/F, Qiangli Business Building, No. 6, Yanda Avenue, Huicheng District, Huizhou City.
2. Party B confirms that its effective address for service is: Bldg. 1, No. 68, Xinsha Road, Pinghu Street, Longgang District, Shenzhen
3. The scope of use of such address for service shall include service of various notices, agreements and documents during litigation between both parties, and service of relevant documents and legal documents of disputes hereunder, including service during first instance, second instance, re-instance and executive procedures after the dispute enters civil procedures.
4. Should Party A's address for service be changed, Party A shall perform the duty of notification and notify Party B in written form; should Party B's address for service be changed, Party B shall perform the duty of notification and notify Party A in written form.
If one party fails to perform the duty of notification pursuant to the preceding paragraph, the address for service confirmed by both parties shall be deemed as the effective address for service. If any legal document fails to be actually received by the party concerned after it is posted because the service for address provided or confirmed is untrue or the party concerned does not perform the duty of notification to the other party and the court after change of the address for service, or the party concerned or its designated person refuses to sign in the document, the date of return of the document shall be deemed as the date of service; if sent directly, the date when the person serving the document records in the service receipt on the spot shall be deemed as the date of service; when the duty of notification on change of the address for service is performed, the address for service changed shall be deemed as the effective address for service. The court may send a legal document directly to the address for service specified by both parties in this Contract, and the document shall be deemed as being served even if one party fails to receive the legal document posted by the court.
5. After a dispute enters the civil procedures, if the address confirmed by any party responding the lawsuit and given in the letter of confirmation of address for service directly submitted to the court is different from that confirmed prior to this lawsuit, the address for service submitted to and confirmed by the court shall be adopted.
Article 16 During the valid period of this Contract, Party A’s tolerance or grace imposed on or Party A’s delay in the execution of its any right under this Contract for Party B’s breach or delay shall not damage, impact or restrict Party A’s all other rights enjoyable as a creditor in accordance with this Contract and relevant laws, and shall not be deemed as Party A’s permit or acceptance of any breach of this Contract nor be deemed as Party A’s waiver of the right to take actions for Party B's current or future behaviors of breach.
Article 17 Applicable Laws and Dispute Settlement
1. This Contract is formulated under the laws of the People’s Republic of China and it shall apply to the laws of the People’s Republic of China.
2. Any and all disputes arising from this Contract shall be settled according to the method specified in the Main Contract.
Article 18 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).
Seal of Party A: Guangdong Huaxing Bank Co., Ltd. Huizhou Branch (Seal)
Signature of Person in Charge or Authorized Agent:
Oct. 26, 2017
Seal of Party B (Party B is an entity): | Party B (Party B is an individual): | |
Shenzhen Highpower Technology Co., Ltd. (Seal) | ||
Signature of Legal Representative or Authorized Agent: | or Signature of Authorized Agent: | |
Pan Dangyu (Signature) | ||
Oct. 26, 2017 | Date: |
Exhibit 10.26(c)
Maximum Pledge Guaranty Contract
Contract No.: H.X.H.F.E.Z.Z. No. 20171026001
Party A (Creditor of the Main Contract): Guangdong Huaxing Bank Co., Ltd. Huizhou Branch
Address: 1/F and 2/F, Qiangli Business Building, No. 6, Yanda Avenue, Huicheng District, Huizhou City
Tel.: 0752-3128618 Fax: 0752-3128615
Person in Charge: Meng Yi Position: President
Party B (Pledgor): Huizhou Highpower Technology Co. Ltd.
Certificate Type *: _______________Certificate No. *:_______________
(Items expressed with * may not be filled if Party B is an entity)
Address: Xinhu Industrial Development Area, Ma’an Town, Huicheng District, Huizhou City
Tel.: _______________ Fax: _______________
Legal Representative **: Pan Dangyu Position **: President
(Items expressed with ** may not be filled if Party B is an individual)
In order to ensure the execution of the Contract (hereinafter referred to as the Main Contract) between Party A and Huizhou Highpower Technology Co. Ltd. (hereinafter referred to as the Debtor) Party B is willing to provide its legally possessed property as a pledge for Party A. IN WITNESS WHEREOF, Party A and Party B hereby agree to make and enter into this Contract upon consensus through consultation. Both Parties are willing to abide by the following terms and conditions.
Article 1 Scope of Pledge Guaranty
The scope of guaranty hereunder (tick "√" in front of the option)
þ Principal, interest, compound interest and default interest of all debts (including contingent liabilities), and expenses for realization of creditor's right bearable by the Debtor under the Comprehensive Credit Line Contract of H.X. H.F.Z. Z. No. 20171026001 , and the expenses for keeping and maintaining the pledged property. The maximum amount (balance) of the principal of these debts shall be (equivalent to) RMB (in words) sixty million only .
□ (Equivalent to) / currency (in words) / of the total principal (equivalent to) / currency (in words) / of all debts (including contingent liabilities) and corresponding interest, compound interest and default interest, and expenses for realization of creditor's right, and the expenses for keeping and maintaining the pledged property bearable by the Debtor under the / Contract of H.X. / Z. No. / . Party A shall have the right to request Party B to bear guaranty liability for the balance of debts within the scope of guaranty above mentioned before the debts under the Main Contract are fully repaid.
□ Execution of all debts under the Main Contract concluded and signed by and between the Debtor and Party A during the period from ___________to ___________. The date of signature of the Main Contract shall be within the period above mentioned, but the execution period of the Main Contract shall not be limited to the period above mentioned. The scope of pledge guaranty of Party B shall include the principal, interest, compound interest and default interest of the Debtor's all debts (including contingent liabilities), and the expenses for realization of creditor's right under the Main Contract, and the expenses for keeping and maintaining the pledged property. The maximum amount (balance) of the principal of the aforesaid debts shall be (equivalent to) / currency (in words) / .
□ | / |
Interest, default interest and compound interest shall be calculated in accordance with the Main Contract and shall be calculated until the debts are fully repaid. The expenses for realization of creditor's right shall include but not be limited to announcement cost, service fee, attorney fee, legal cost, traveling expenses, appraisal cost, auction expenses, property preservation cost and enforcement fee.
Exchange rates of currencies other than RMB shall be converted according to the foreign exchange rate published by Party A when a specific business actually occurs.
Article 2If the Debtor transfers its credit line granted by Party A to a third party for use, Party B agrees to bear liability of pledge guaranty for the transferred part according to the stipulations of this Contract. The specific transferred object and amount is as follows:
1. | ____ / (Credit Transferee), amount: (equivalent to) / (currency) (in words) / ; |
2. | ____/ (Credit Transferee), amount: (equivalent to) / (currency) (in words) / ; |
3. | / (Credit Transferee), amount: (equivalent to) / (currency) (in words) / ; |
4. | / | |
. |
Article 3 Other provisions agreed by Party A and Party B:
/ | |
Article 4 This Contract is made out in two (2) originals for Party A holding one (1) , and Party B, the Debtor, / , / and / each holding one (1) , which shall be equally authentic.
Article 5 Enforcement of Notarization
□ Both Parties agree to handle enforcement of notarization for this Contract.
If Party B does not perform or does not completely perform its obligations specified herein after enforcement of notarization of this Contract is handled by both parties, Party A shall have the right to apply to the original notary public for an enforcement certificate, and holding the original notarial certificate and the enforcement certificate, apply to 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.
þ No enforcement of notarization shall be handled for this Contract.
Article 6 Refer to the List of Pledged Property for the detailed situations of the pledged property.
After the signature of this Contract, Party B shall timely submit the pledged property to Party A or go through formalities for pledge registration to ensure Party A's pledge right legitimate and effective.
Without Party A's agreement, Party B's aforesaid pledged property may not be transferred or allowed to others for use or disposal by other means after it is pledged. In the event that transfer is agreed through consultation between Party A and Party B, the funds obtained from transfer shall be used for prepaying Party A the creditor's right secured or depositing in the third party designated by Party A.
If the pledged property is a certificate of deposit or a financial product of bank, but the debts within the scope of pledge guaranty are not yet due or are matured in advance when the certificate of deposit or the financial product of bank expires, Party B authorizes Party A to deposit the certificate of deposit automatically. Party B shall continue to provide pledge guaranty with the certificate of deposit which is automatically deposited, or Party B shall authorize Party A to transfer the principal and incomes liquidated from the due financial product of bank to the deposit account and Party B shall continue to provide pledge guaranty with the funds in the deposit account.
If the pledged property is national debt or structure deposit wealth product or other transferable property right, Party B irrevocably authorizes Party A to directly transfer the principal and incomes to the deposit account after maturity of the pledged property to continuously provide security for the debts under the Main Contract; or deduct the principal and interest of the due creditor's right from the due principal and incomes of the pledged property.
During the period of credit granted by Party A to the Debtor, if the value of the pledged property is depreciated due to change of exchange rate, serious fluctuation of the financial market or due to other causes, thereby affecting the safety of the creditor's right of Party A, Party B shall, within three working days after receipt of Party A's notice, make up the deposit according to the requirements notified by Party A, or Party A shall have the right to request Party B to bear liability for breach of contract pursuant to Article 7 herein.
Article 10 Party B's Event of Default and Liability for Breach of Contract
I. Event of default
Under any one of the circumstances, an event of default shall be deemed as having occurred:
1. Party B violates its obligations performable under this Contract, or Party B expressly indicates or indicates through its acts that it does not perform its obligations under this Contract;
2.The relevant certificates and documents submitted by Party B to Party A or the representations, warranties and commitments made by Party B are not true, not accurate or not complete, or have false record, misleading statement or major omission;
3. Party B conceals some important true information, or fails to coordinate Party A’s investigation, examination and inspection;
4. The pledge is invalid or cancelled;
5. The debt under the Main Contract is matured or accelerated, and the creditor's right of Party A is not fully or partially repaid;
6. Party B hasn't any or complete ownership or disposal right of the pledged property, or there is any dispute about the ownership of the pledged property;
7. The pledged property is damaged or the value of the pledged property is significantly depreciated, or there is any possibility of damage to the pledged property or depreciation of the value of the pledged property;
8. Without Party A's written agreement, Party B transfers or disposes by other means the pledged property, or allows others to use the pledged property;
9. Other circumstances which may endanger or likely to endanger Party A's rights and interests related to the pledged property.
II. Liability for breach of contract
In case of any default event as set forth in Clause I of this Article, Party A shall have the right to take one or more of the following actions:
1. to request Party B to recover the value of the pledged property or provide other collateral accepted by Party A;
2. to claim Party B for compensation for Party A's all losses;
3. to liquidate the certificate directly for repaying the creditor's right of Party A if the pledged property is a certificate of deposit;
4. to gain compensation in priority from the incomes from discount, or auction or sale of the pledged property by law; if the incomes from from auction or sale of the pledged property exceeds the creditor's right of Party A, the positive difference shall be kept by Party B; if the incomes therefrom is insufficient to prepay the creditor's right of Party A, Party A shall press for payment separately;
5. Other remedial measures that Party A has the right to claim according to law and agreement.
Article 8 No matter whether the creditor's right under the maximum pledge guaranty is determined or not, Party A shall have the right to transfer all or part of its creditor's right. If Party A transfers all or part of its creditor's right, Party B agrees that Party A may transfer all or part of the pledge right together with the creditor's right. If Party A transfers part of the pledge right, the specific share to be transferred shall be determined through consultation between Party A and the transferee and shall be notified to Party B, unnecessary to obtain Party B's agreement. Party B has the obligation to coordinate to go through formalities for pledge registration according to Party A's requirements.
Article 9 Representations, Warranties and Commitments of Party B
1. Party B has lawful power, right and authorization to sign, deliver and execute this Contract. This Contract constitutes an agreement binging upon Party B and shall be executed by Party B according to the terms and conditions of this Contract.
2. If Party B is a company, it shall be 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. Party B ensures that all the application materials provided to Party A are true, complete, legitimate and effective and exclude any false record, misleading statement or major omission.
4. Party B ensures that it has the legitimate right to pledge the pledged property, without any dispute with any third person. Party B's acts of signature and execution of this Contract have no conflict with any other contract signed and executed by Party B.
5. Party B hereby undertakes to perform its all obligations hereunder by ways of goodwill. Without Party A’s written consent in advance, Party B may not conduct any behavior (including those which should be done and which may not be done) which may endanger the realization of claim under this Contract.
6. Party B hereby makes commitments, if Party B changes its domicile, mailing address, telephone number and employment conditions (or business scope, legal representative) or other relevant items, it shall notify Party A in writing within ten 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 to Party B.
7. Party B hereby confirms that it has carefully read, fully known and understood all terms and conditions of this Contract and conclusion of this Contract is the representation of its true meaning.
8. Party B warrants that its representations made in the Contract Annex, List of Pledged Property , are true, accurate and complete. Where there is untrue information or important omission in these representations, thereby causing the pledged property invalid or devalued and harming Party A's right, Party B is willing to bear joint and several liability of repayment for the Debtor's all debts under the Main Contract.
Article 10 The pledged property provided by Party B is an independent pledged property, without being affected or replaced by the security provided by other guarantor.
Article 11 In the event that the Main Contract or a specific business contract under the Main Contract becomes invalid or partially invalid by law, Party A shall also have the right to request the Debtor of the Main Contract to return the agreed credit principal and interest and other relevant funds in accordance with relevant laws and regulations. In this case, the validity of this Contract shall not be affected, and Party B shall also bear guaranty liability for the repayment liability of the Debtor of the Main Contract according to the conditions specified herein.
Article 12 All expenses of both parties for the conclusion and execution of this Contract, including notarization or witness fee, registration fee, auction or sale expenses shall be handled according to relevant provisions of the State; in the absence of such provisions, Party A and Party B shall make determination through consultation between both parties.
Article 13 Amendment to Contract
1. This Contract may be amended or cancelled upon consensus through consultation between both parties hereto. The agreement on amendment or cancellation of this Contract shall be made in written form.
2. When the Main Contract is amended, Party A shall timely solicit Party B's agreement in writing. Upon Party B's agreement, Party B shall bear guaranty liability for the debts of the original Main Contract and the amended Main Contract . However, the Debtor's debts are lightened (including but not limited to reduce of the amount or shortening of the term of debts under the Main Contract) due to amendment to the Main Contract, Party B shall be deemed as having agreed such amendment and, without obtaining Party B's agreement, Party B shall continue to bear guaranty liability for the debts of the amended Main Contract.
Article 14 During the valid period of this Contract, Party A’s tolerance or grace imposed on or Party A’s delay in the execution of its any right under this Contract for Party B’s breach or delay shall not damage, impact or restrict Party A’s all other rights enjoyable as a creditor in accordance with this Contract and relevant laws, and shall not be deemed as Party A’s permit or acceptance of any breach of this Contract nor be deemed as Party A’s waiver of the right to take actions for Party B's current or future behaviors of breach.
Article 15 Anti-corruption and Anti-bribery
1. Both parties of this Contract know and are willing to strictly abide by the anti-corruption and anti-bribery laws and regulations of the People's Republic of China.
2. One party hereto or the agent of one party hereto shall not give or promise to give non-agreed unjust benefits of any form, including but not limited to cash, negotiable securities, shopping card, gifts and tourism,to the other party's main principal, agent or other related personnel, nor ask for unjust benefits of any form from the other party's main principal, agent or other related personnel. Otherwise, the party concerned shall make compensation for the other party's all losses arising therefrom once it is detected.
3. “Other affiliated personnel” referred to in sub-clause 2 of this Article means the personnel directly or indirectly related to the business hereunder other than the other party's main principal and agent, including but not limited to the family members and friends of the other party's main principal and agent.
Article 16 Confirmation of Address for Service
Party A and Party B agree as follows on the service address and legal consequences of various notices, agreements and documents concerned herein, and relevant documents and legal documents of disputes hereunder:
1. Party A confirms that its effective address for service is: 1/F and 2/F, Qiangli Business Building, No. 6, Yanda Avenue, Huicheng District, Huizhou City.
2. Party B confirms that its effective address for service is: Xinhu Industrial Development Area, Ma’an Town, Huicheng District, Huizhou City.
3. The scope of use of such address for service shall include service of various notices, agreements and documents during litigation between both parties, and service of relevant documents and legal documents of disputes hereunder, including service during first instance, second instance, re-instance and executive procedures after the dispute enters civil procedures.
4. Should Party A's address for service be changed, Party A shall perform the duty of notification and notify Party B in written form; should Party B's address for service be changed, Party B shall perform the duty of notification and notify Party A in written form.
If one party fails to perform the duty of notification pursuant to the preceding paragraph, the address for service confirmed by both parties shall be deemed as the effective address for service. If any legal document fails to be actually received by the party concerned after it is posted because the service for address provided or confirmed is untrue or the party concerned does not perform the duty of notification to the other party and the court after change of the address for service, or the party concerned or its designated person refuses to sign in the document, the date of return of the document shall be deemed as the date of service; if sent directly, the date when the person serving the document records in the service receipt on the spot shall be deemed as the date of service; when the duty of notification on change of the address for service is performed, the address for service changed shall be deemed as the effective address for service. The court may send a legal document directly to the address for service specified by both parties in this Contract, and the document shall be deemed as being served even if one party fails to receive the legal document posted by the court.
5. After a dispute enters the civil procedures, if the address confirmed by any party responding the lawsuit and given in the letter of confirmation of address for service directly submitted to the court is different from that confirmed prior to this lawsuit, the address for service submitted to and confirmed by the court shall be adopted.
Article 17 Applicable Laws and Dispute Settlement
1. This Contract is formulated under the laws of the People’s Republic of China and it shall apply to the laws of the People’s Republic of China.
2. Any and all disputes arising from this Contract shall be settled according to the method specified in the Main Contract.
Article 18 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).
Annex: List of Pledged Property (additional page is allowed where there is not enough space in the form)
List of Pledged Property
SN | Name | Quantity | Quality |
Property Right and Ownership |
Property Ownership Certificate No. |
Place of Storage |
Share of
the
Property Held by the Pledgor |
Name of Co-owner (if any) |
Other Status of the Pledged Property |
|||||||||
1 | Accounts receivable | Huizhou Highpower Technology Co. Ltd. | 100% | |||||||||||||||
2 | ||||||||||||||||||
3 |
The Pledgor warrants that these representations are true, accurate and complete. Where there is untrue information or important omission in these representations, thereby causing the pledged property invalid or devalued and harming main creditor's right, the Pledgor is willing to bear joint and several liability of repayment for the Debtor's all debts under the Main Contract.
Seal of Party A:
Guangdong Huaxing Bank Co., Ltd. Huizhou Branch (Seal)
Signature of Person in Charge or Authorized Agent:
Oct. 26, 2017
Seal of Party B (Party B is an entity): | Party B (Party B is an individual): | |
Huizhou Highpower Technology Co. Ltd. (Seal) | ||
Sig nature of Legal Representative or Authorized Agent: | or Signature of Authorized Agent: | |
Pan Dangyu (Signature) | ||
Oct. 26, 2017 | Date: |
Exhibit 23.1
Independent Registered Public Accounting Firm’s Consent
We consent to the incorporation by reference in the Registration Statement of Highpower International, Inc. and subsidiaries (the “Company”) on Forms S-8 (File No.333-222315 and 333-157443) and Form S-3 (File No. 333-217294) of our report dated April 4, 2018, with respect to our audits of the consolidated financial statements of the Company as of December 31, 2017 and 2016, and for the years ended December 31, 2017 and 2016, which report is included in this Annual Report on Form 10-K of the Company for the year ended December 31, 2017.
/s/ Marcum Bernstein & Pinchuk llp
Marcum Bernstein & Pinchuk llp
Guangzhou, China
April 4, 2018
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: April 4, 2018 | |
/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, Shengbin (Sunny) 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: April 4, 2018 | |
/s/ Shengbin (Sunny) Pan | |
Shengbin (Sunny) Pan | |
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, 2017, 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) | |
April 4, 2018 | |
/s/ Shengbin (Sunny) Pan | |
Shengbin (Sunny) Pan | |
Chief Financial Officer | |
(Principal Financial and Accounting Officer) | |
April 4, 2018 |