Item 1. Financial Statements
See accompanying notes to unaudited condensed
consolidated financial statements.
See accompanying notes to unaudited condensed
consolidated financial statements.
The following table shows a reconciliation of cash, cash equivalents
and restricted cash on the condensed consolidated balance sheets to that presented in the above condensed consolidated statements
of cash flows.
See accompanying notes to unaudited condensed
consolidated financial statements.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 1 - Basis of presentation, significant concentrations and
risks
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
("U.S. GAAP"). Certain information and footnote disclosures normally included in financial statements prepared in accordance
with U.S. GAAP have been condensed or omitted as permitted by rules and regulations of the United States Securities and Exchange
Commission ("SEC"). The condensed consolidated balance sheet as of December 31, 2019 was derived from the audited consolidated
financial statements of China XD Plastics Company Limited ("China XD") and subsidiaries (collectively, the "Company").
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated balance
sheet of the Company as of December 31, 2019, and the related consolidated statements of comprehensive income, changes in equity
and cash flows for the year then ended, included in the Company's Annual Report on Form 10-K filed with the SEC on June 1, 2020.
In the opinion of the management, all adjustments
(which include normal recurring adjustments) necessary to present a fair statement of the financial position as of September 30,
2020, the results of operations and cash flows for the nine-month periods ended September 30, 2020 and 2019, have been made.
The preparation of condensed consolidated financial
statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates. Significant items subject to such estimates and assumptions include the recoverability of the carrying amounts of property,
plant and equipment, the realizability of inventories, the useful lives of property, plant and equipment, the collectability of
accounts receivable, the realizability of long-term prepayments to equipment and construction suppliers, the accruals for tax uncertainties
and other contingencies, and the discount rate used to determine the present value of the lease payments. The current economic
environment has increased the degree of uncertainty inherent in those estimates and assumptions.
(b) Accounting pronouncement adopted
in 2020
In August 2018, the FASB issued ASU 2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU
2018-13”), which modifies the disclosure requirements on fair value measurements. The Company has adopted the standard on
January 1, 2020 and there was no material impact on its consolidated financial statements as a result of the adoption.
(c) Significant concentrations and risks
Sales concentration
The Company sells its products primarily through
approved distributors in the People's Republic of China (the "PRC"). The Company's sales are highly concentrated. Sales
to distributors individually exceeded 10% of the Company's revenues for the three-month and nine-month periods ended September
30, 2020 and 2019, are as follows:
|
|
Three-Month Period Ended September 30,
|
|
|
2020
|
|
2019
|
|
|
US$
|
|
%
|
|
US$
|
|
%
|
Distributor A, located in PRC
|
|
|
38,046,476
|
|
|
|
13.1
|
%
|
|
|
48,354,258
|
|
|
|
13.0
|
%
|
Distributor B, located in PRC
|
|
|
29,662,386
|
|
|
|
10.2
|
%
|
|
|
31,224,911
|
|
|
|
*
|
%
|
Distributor C, located in PRC
|
|
|
29,264,142
|
|
|
|
10.1
|
%
|
|
|
41,236,907
|
|
|
|
11.1
|
%
|
Total
|
|
|
96,973,004
|
|
|
|
33.4
|
%
|
|
|
120,816,076
|
|
|
|
32.5
|
%
|
|
|
Nine-Month Period Ended September 30,
|
|
|
2020
|
|
2019
|
|
|
US$
|
|
%
|
|
US$
|
|
%
|
Distributor A, located in PRC
|
|
|
105,817,083
|
|
|
|
14.7
|
%
|
|
|
163,355,649
|
|
|
|
14.4
|
%
|
Distributor B, located in PRC
|
|
|
76,399,236
|
|
|
|
10.6
|
%
|
|
|
115,842,572
|
|
|
|
10.2
|
%
|
Distributor C, located in PRC
|
|
|
75,736,243
|
|
|
|
10.5
|
%
|
|
|
86,271,299
|
|
|
|
*
|
%
|
Total
|
|
|
257,952,562
|
|
|
|
35.8
|
%
|
|
|
365,469,520
|
|
|
|
32.2
|
%
|
The Company expects revenues from these distributors
to continue to represent a substantial portion of its revenue in the future. Any factor adversely affecting the automobile industry
in the PRC or the business operations of these customers will have a material effect on the Company's business, financial position
and results of operations.
Purchase concentration of raw materials
and equipment
The principal raw materials used for the Company's
production of modified plastics products are plastic resins, such as polypropylene, ABS and nylon. The Company purchases substantially
all of its raw materials through a limited number of distributors. Raw material purchases from these distributors, which
individually exceeded 10% of the Company's total raw material purchases, accounted for approximately 33.1% (three distributors)
and 31.6% (three distributors) for the three-month periods ended September 30, 2020 and 2019, respectively, and 32.0% (three distributors)
and 32.6% (three distributors) of the Company's total raw materials purchases for the nine-month periods ended September 30, 2020
and 2019, respectively. Management believes that other suppliers could provide similar raw materials on comparable terms. A change
in suppliers, however, could cause a delay in manufacturing and a possible loss of sales, which would adversely affect the Company's
business, financial position and results of operations.
Cash and cash equivalents, restricted cash, and time deposits mentioned
below maintained at banks consist of the following:
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
|
US$
|
|
Renminbi (“RMB”) denominated bank deposits with:
|
|
|
|
|
|
|
|
|
Financial Institutions in the PRC
|
|
|
382,876,978
|
|
|
|
226,488,069
|
|
Financial Institutions in Hong Kong Special Administrative Region ("Hong Kong SAR")
|
|
|
8,360
|
|
|
|
8,134
|
|
Financial Institution in Dubai, UAE
|
|
|
1,154
|
|
|
|
—
|
|
U.S. dollar denominated bank deposits with:
|
|
|
|
|
|
|
|
|
Financial Institution in the U.S.
|
|
|
42,510
|
|
|
|
3,057
|
|
Financial Institutions in the PRC
|
|
|
16,266
|
|
|
|
16,868
|
|
Financial Institution in Hong Kong SAR
|
|
|
652,459
|
|
|
|
590,131
|
|
Financial Institution in Macau Special Administrative Region ("Macau SAR")
|
|
|
1,290,068
|
|
|
|
1,288,792
|
|
Financial Institution in Dubai, UAE
|
|
|
5,163
|
|
|
|
4,549
|
|
HK dollar denominated bank deposits with:
|
|
|
|
|
|
|
|
|
Financial institution in Hong Kong SAR
|
|
|
156
|
|
|
|
156
|
|
Dirham denominated bank deposits with:
|
|
|
|
|
|
|
|
|
Financial institution in Dubai, UAE
|
|
|
312,344
|
|
|
|
33,263
|
|
The bank deposits
with financial institutions in the PRC are insured by the government authority for up to RMB500,000. The bank deposits with
financial institutions in the Hong Kong SAR are insured by the government authority for up to HK$500,000. The bank deposits
with financial institutions in the Macau SAR are insured by the government authority for up to MOP$500,000. The bank deposits with
financial institutions in the Dubai, UAE are not insured by the government authority. Total bank deposits amounted to US$1,260,935
and US$1,063,709 are insured as of September 30, 2020 and December 31, 2019, respectively. The Company has not experienced any
losses in uninsured bank deposits and does not believe that it is exposed to any significant risks on cash held in bank accounts.
To limit exposure to credit risk, the Company primarily places bank deposits with large financial institutions in the PRC, Hong
Kong SAR, Macau SAR and Dubai, UAE with acceptable credit rating.
Cash deposits in bank that are restricted as
to withdrawal or usage for up to 12 months are reported as restricted cash in the consolidated balance sheets.
Short-term bank deposits that are pledged
as collateral for bills payable relating to purchases of raw materials are reported as restricted cash and amounted to US$107,803,719
and US$151,498,873 as of September 30, 2020 and December 31, 2019, respectively. Upon maturity and repayment of the bills payable,
which is generally within 6 months, the cash becomes available for use by the Company.
Short-term bank deposits
that are related to letter of credit are reported as restricted cash and amounted to US$7,004,302 and nil as of September 30,
2020 and December 31, 2019, respectively.
Short-term bank deposits
that are related to government grant are reported as restricted cash and amounted to US$71,617 and US$69,879 as of September 30,
2020 and December 31, 2019, respectively.
Short-term bank deposits that are pledged for
the US$135.0 million syndicated loans obtained from a consortium of banks led by the Industrial and Commercial Bank of China (Macau)
Limited are reported as restricted cash and amounted to US$59,642,229 and US$58,229,047 as of September 30, 2020 and December 31,
2019, respectively, for details of the syndicated loans please refer to note 7.
Short-term bank deposits
that are pledged as collateral to settle US$14.7 million of short-term bank loans obtained from Postal Savings Bank of China are
reported as restricted cash and amounted to US$1,468,407 and US$1,433,445 as of September 30, 2020 and December 31, 2019, respectively.
Short-term bank deposits
that are pledged as collateral to settle US$36.7 million of short-term bank loans obtained from Nanchong Rural Commercial Bank
are reported as restricted cash and amounted to US$440,522 and nil as of September 30, 2020 and December 31, 2019, respectively.
Note 2 –
Accounts receivable
Accounts receivable consists of the following:
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
219,534,142
|
|
|
|
284,921,071
|
|
Allowance for doubtful accounts
|
|
|
(69,731,382
|
)
|
|
|
(62,849,018
|
)
|
Accounts receivable, net
|
|
|
149,802,760
|
|
|
|
222,072,053
|
|
As of September 30, 2020 and December 31,
2019, the accounts receivable balances also include notes receivable in the amount of US$19,655 and US$107,845, respectively.
As of September 30, 2020 and December 31, 2019, US$73,042,003 and US$92,198,221, respectively, of accounts receivable are pledged
for the short-term bank loans and bills payable.
As of September 30, 2020, accounts receivable
of US$2.0 million from the Company’s two customers in UAE and US$4.9 million from the Company’s customer in PRC was
overdue for more than 12 months. Based on assessment of the collectability of the amounts due from the customers, the Company provided
an allowance for doubtful accounts of US$6.9 million for the period ended September 30, 2020.
As of December 31, 2019, accounts receivable
of US$62.8 million from the Company’s customer in UAE was overdue and the customer failed to make payments under the agreed
extended repayment plan. Based on its assessment of the collectability of the amounts due from the customer, the Company provided
an allowance for doubtful accounts of US$62.8 million for the year ended December 31, 2019.
The following table provides an analysis of
the aging of accounts receivable as of September 30, 2020 and December 31, 2019:
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
|
US$
|
|
Aging:
|
|
|
|
|
|
|
|
|
– current
|
|
|
72,028,806
|
|
|
|
189,180,366
|
|
– 1-3 months past due
|
|
|
67,986,417
|
|
|
|
45,363,405
|
|
– 4-6 months past due
|
|
|
16,208,535
|
|
|
|
28,865,350
|
|
– 7-12 months past due
|
|
|
38,827,738
|
|
|
|
5,703,612
|
|
– greater than one year past due
|
|
|
24,482,646
|
|
|
|
15,808,338
|
|
Total accounts receivable
|
|
|
219,534,142
|
|
|
|
284,921,071
|
|
Note 3 – Inventories
Inventories consist of the following:
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Raw materials and semi-finished goods
|
|
|
686,037,738
|
|
|
|
637,278,817
|
|
Finished goods
|
|
|
63,332,446
|
|
|
|
5,230,717
|
|
Total inventories
|
|
|
749,370,184
|
|
|
|
642,509,534
|
|
As of September 30, 2020 and December 31, 2019,
the Company pledged inventories in amount of approximately US$39.1 million and US$40.1 million, respectively, for a one-year short-term
loan and bills payable, details refer to Note 7.
There were no write down of inventories for
the three-month and nine-month periods ended September 30, 2020 and 2019.
Note 4 – Prepaid expenses and other current assets
Prepaid expenses and other current assets consist of the following:
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Advances to suppliers (i)
|
|
|
78,194,802
|
|
|
|
118,166,925
|
|
Amounts due from third parties (ii)
|
|
|
278,151,945
|
|
|
|
—
|
|
Value added taxes receivables (iii)
|
|
|
3,076,204
|
|
|
|
6,239,719
|
|
Receivables from Hong Kong Grand Royal Trading Co., Ltd. (iv)
|
|
|
—
|
|
|
|
42,566,949
|
|
Interest receivable (v)
|
|
|
1,020,348
|
|
|
|
615,049
|
|
Others (vi)
|
|
|
5,900,917
|
|
|
|
4,259,480
|
|
Total prepaid expenses and other current assets
|
|
|
366,344,216
|
|
|
|
171,848,122
|
|
(i) Advances to suppliers are the advances
to purchase raw materials.
(ii) As of September 30, 2020, the Company
has receivables of RMB1,005.8 million (equivalent to US$147.7 million) due from Heilongjiang Xinda Enterprise Group Shanghai New
Materials Sales Company Limited (“Shanghai Sales”), a company formerly owned by the Company and was disposed in December
2018, RMB612.2 million (equivalent to US$89.9 million) due from Heilongjiang Xinda Macromolecule Composite Materials Company Limited
(“Macromolecule Composite Materials”), a company established by Shanghai Sales (details refer to note 9), and RMB286.7
million (equivalent to US$40.5 million) due from Guangzhou Peiqu International Trading LLC, the Company’s supplier and a
related party of Hong Kong Grand Royal Trading Co., Ltd., as interest-free advances.
(iii) Value added taxes receivables mainly
represent the input taxes on purchasing equipment by Heilongjiang Xinda Enterprise Group Company Limited (“HLJ Xinda Group”)
and Sichuan Xinda Enterprise Group Company Limited (“Sichuan Xinda”), which are to be net off with output taxes. Value
added taxes receivables were recognized in operating activities in consolidated statements of cash flows.
(iv) Hong Kong Grand Royal Trading Co.,
Ltd. (“Hong Kong Grand Royal”) is a raw material supplier of AL Composites Materials FZE ("Dubai Xinda").
Dubai Xinda has prepaid US$48.2 million to Hong Kong Grand Royal in 2017 for purchase of raw materials. Due to the price fluctuation
of raw materials, Hong Kong Grand Royal could not purchase and deliver the raw materials to Dubai Xinda. In July 2019, both parties
entered into a supplemental agreement to cancel the original purchase agreements and Hong Kong Grand Royal shall settle the advance
payment. The US$42.6 million advance payment as of December 31, 2019 was settled during the nine-month period ended September 30,
2020.
(v) Interest receivable mainly represents
interest income accrued from time deposits and restricted cash.
(vi) Others mainly include prepaid miscellaneous
service fee, staff advance and prepaid rental fee.
Note 5 – Property, plant and equipment, net
Property, plant and equipment consist of the following:
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Machinery, equipment and furniture
|
|
|
529,838,814
|
|
|
|
575,317,840
|
|
Motor vehicles
|
|
|
1,853,135
|
|
|
|
1,709,182
|
|
Workshops and buildings
|
|
|
159,098,559
|
|
|
|
156,256,761
|
|
Construction in progress
|
|
|
408,344,010
|
|
|
|
335,245,525
|
|
Total property, plant and equipment
|
|
|
1,099,134,518
|
|
|
|
1,068,529,308
|
|
Less accumulated depreciation
|
|
|
(242,323,746
|
)
|
|
|
(238,209,592
|
)
|
Property, plant and equipment, net
|
|
|
856,810,772
|
|
|
|
830,319,716
|
|
For the three-month periods ended September
30, 2020 and 2019, the Company capitalized US$1,193,381 and US$1,581,827 of interest costs as a component of the cost of construction
in progress. For the nine-month periods ended September 30, 2020 and 2019, the Company capitalized US$3,834,981 and US$2,326,326
of interest costs as a component of the cost of construction in progress. Depreciation expense on property, plant and equipment
was allocated to the following expense items:
|
|
Three-Month Period Ended
September 30,
|
|
|
2020
|
|
2019
|
|
|
US$
|
|
US$
|
Cost of revenues
|
|
|
11,999,298
|
|
|
|
13,251,745
|
|
General and administrative expenses
|
|
|
614,245
|
|
|
|
524,249
|
|
Research and development expenses
|
|
|
527,799
|
|
|
|
887,462
|
|
Selling expenses
|
|
|
613
|
|
|
|
1,107
|
|
Total depreciation expense
|
|
|
13,141,955
|
|
|
|
14,664,563
|
|
|
|
Nine-Month Period Ended
September 30,
|
|
|
2020
|
|
2019
|
|
|
US$
|
|
US$
|
Cost of revenues
|
|
|
35,987,567
|
|
|
|
40,232,815
|
|
General and administrative expenses
|
|
|
1,828,697
|
|
|
|
1,730,020
|
|
Research and development expenses
|
|
|
1,854,544
|
|
|
|
2,855,749
|
|
Selling expenses
|
|
|
5,835
|
|
|
|
3,384
|
|
Total depreciation expense
|
|
|
39,676,643
|
|
|
|
44,821,968
|
|
Note 6 - Prepayments to equipment and construction suppliers
|
|
September 30
2020
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
Hailezi (i)
|
|
|
435,108,985
|
|
|
|
468,529,714
|
|
Beijin Construction (ii)
|
|
|
7,204,409
|
|
|
|
6,795,439
|
|
Peaceful Treasure Limited(iii)
|
|
|
—
|
|
|
|
19,967,014
|
|
Xinda High-Tech (iv)
|
|
|
17,667,141
|
|
|
|
—
|
|
Others
|
|
|
212,132
|
|
|
|
278,254
|
|
Total prepayments to equipment and construction suppliers
|
|
|
460,192,667
|
|
|
|
495,570,421
|
|
(i) The table below summarized the balance
of prepayments to Hailezi for each of the projects as of September 30, 2020 and December 31, 2019, and the movements of the prepayments:
(in millions US$)
|
Year
|
|
Projects
|
|
Balance as of
December 31, 2019
|
|
Prepaid in 2020
|
|
Transfer to CIP in 2020
|
|
Effect of foreign currency exchange rate changes
|
|
Balance as of
September 30, 2020
|
|
2017
|
|
|
Storage system
|
|
|
36.7
|
|
|
|
-
|
|
|
|
(0.6
|
)
|
|
|
0.7
|
|
|
|
36.8
|
|
|
2017
|
|
|
HLJ Project
|
|
|
5.9
|
|
|
|
-
|
|
|
|
(5.9
|
)
|
|
|
-
|
|
|
|
-
|
|
|
2018
|
|
|
HLJ Project
|
|
|
77.4
|
|
|
|
-
|
|
|
|
(0.2
|
)
|
|
|
2.1
|
|
|
|
79.3
|
|
|
2017
|
|
|
Nanchong Project
|
|
|
3.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3.0
|
|
|
2018
|
|
|
Nanchong Project
|
|
|
245.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6.1
|
|
|
|
251.2
|
|
|
2019
|
|
|
Qinling Road Project
|
|
|
18.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.4
|
|
|
|
19.0
|
|
|
2019
|
|
|
Jiangnan Road Project
|
|
|
81.8
|
|
|
|
-
|
|
|
|
(37.4
|
)
|
|
|
1.0
|
|
|
|
45.4
|
|
|
2020
|
|
|
Others
|
|
|
-
|
|
|
|
2.6
|
|
|
|
(2.2
|
)
|
|
|
-
|
|
|
|
0.4
|
|
|
Total
|
|
|
|
|
|
468.5
|
|
|
|
2.6
|
|
|
|
(46.3
|
)
|
|
|
10.3
|
|
|
|
435.1
|
|
(ii) Since November 15, 2016, Sichuan Xinda entered into decoration contracts
with Sichuan Beijin Construction Engineering Company Limited ("Beijin Construction") to perform indoor and outdoor decoration
work for a consideration of RMB264.3 million (equivalent to US$38.8 million). Pursuant to the contracts with Beijin Construction,
Sichuan Xinda has prepaid RMB122.8 million (equivalent to US$18.0 million) as of September 30, 2020, of which RMB74.0 million (equivalent
to US$10.9 million) was transferred to construction in progress.
(iii) On October 20, 2016, Sichuan Xinda
entered into an equipment purchase agreement purchase contract with Peaceful Treasure Limited ("Peaceful") for a total
consideration of RMB89.8 million (equivalent to US$13.2 million) to purchase certain production and testing equipment. The Company
prepaid RMB 33.9 million (equivalent to US$5.0 million) as of September 30, 2020.
On May 31, 2019, Dubai
Xinda entered into an equipment purchase contract with Peaceful for a total consideration of US$18.8 million to purchase storage
and testing equipment. The Company prepaid US$17.0 million as of September 30, 2020.
As of September 30, 2020,
Peaceful failed to deliver the equipments under the purchase agreements. Based on the assessment of the realizability of the prepayments,
the Company recognized a provision of US$22.0 million for the period ended September 30, 2020.
(iv) On January 10, 2020, Heilongjiang Xinda
New Materials Co., Ltd. (“HLJ New Materials”), a subsidiary of the Company, entered into a purchase agreement with
Harbin Xinda High-Tech Co., Ltd. (“Xinda High-Tech”) to purchase the land use right, buildings and facilities of one
factory in Heilongjiang Province from Xinda High-Tech for a consideration of RMB120.3 million (equivalent to USD17.7 million).
On January 23, 2020, HLJ New Materials has paid the consideration to Xinda High-Tech. As of September 30, 2020, the transfer procedures
were not completed and were expected to be completed in the fourth quarter of 2020.
Note 7 – Borrowings
The Company has credit facilities with several
banks under which they draw short-term and long-term bank loans as described below.
(a) Current
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
|
US$
|
|
Unsecured loans
|
|
|
479,904,847
|
|
|
|
407,657,464
|
|
Loans secured by accounts receivable (i)
|
|
|
66,078,325
|
|
|
|
64,505,031
|
|
Guaranteed loan (ii)
|
|
|
36,710,180
|
|
|
|
—
|
|
Loans secured by restricted cash (iii)
|
|
|
14,684,072
|
|
|
|
14,334,451
|
|
Syndicated loan facility (iv)
|
|
|
115,972,199
|
|
|
|
128,020,559
|
|
Loan secured by inventories (v)
|
|
|
5,873,629
|
|
|
|
5,733,781
|
|
Current portion of long-term bank loans (note b)
|
|
|
76,276,389
|
|
|
|
59,923,573
|
|
Total short-term loans, including current portion of long-term bank loans
|
|
|
795,499,641
|
|
|
|
680,174,859
|
|
As of September 30, 2020 and December 31, 2019, the Company's
short-term bank loans (including the current portion of long-term bank loans) bear a weighted average interest rate of 5.1% and
5.0% per annum, respectively. All short-term bank loans mature at various times within one year and contain no renewal terms.
(i) As of September 30, 2020 and December
31, 2019, the Company had US$66.1 million and US$64.5 million of short-term bank loans obtained from Longjiang Bank secured by
accounts receivables of US$2.4 million and US$94.4 million, respectively.
In March 2020, the Company obtained a one-year
short-term loan of RMB50.0 million (equivalent to US$7.3 million) from Sichuan Tianfu Bank. As of September 30, 2020, the above
loan together with bills payable in amount of RMB477.0 million (equivalent to US$70.0 million) issued by Sichuan Tianfu Bank were
secured by accounts receivable of US$70.6 million.
(ii) In January 2019, Sichuan Xinda obtained
a one-year short-term unsecured bank loan of RMB250.0 million (equivalent to US$36.7 million) from Nanchong Rural Commercial Bank.
Pursuant to the extension agreement dated January 2020, the loan maturity date was extended to July 2020 with a third-party guarantee
provided by Nanchong Shuntou Development Group Co., Ltd. (“Shuntou”). Pursuant to the loan contract, the ratio of liabilities
to assets of Sichuan Xinda shall not exceed 55%. The loan was repaid in July 2020. In July 2020, Sichuan Xinda obtained a new one-year
short-term unsecured bank loan of RMB250.0 million (equivalent to US$36.7 million) from Nanchong Rural Commercial Bank.
(iii) As of September 30, 2020 and December
31, 2019, the Company had US$14.7 million and US$14.3 million of short-term bank loans secured by restricted cash of US$1.5 million
and US$1.5 million, respectively.
(iv) On October 2,
2019, Xinda Holding (HK) Company Limited ("Xinda Holding (HK)"), a wholly owned subsidiary of the Company, entered
into a facility agreement for a one-year loan facility due on December 15,2020 in an aggregate amount of US$135.0 million
with a consortium of banks and financial institutions led by Industrial and Commercial Bank of China (Macau) Limited. The
Company made the drawdown on December 18, 2019. The interest rate of the loan is 2.0% plus three-month LIBOR. The Company
incurred agency fee and arrangement fee in the amount of US$7.2 million for the loan and without unamortized balance as of
September 30, 2020. Loan issuance costs are presented on the consolidated balance sheets as a direct deduction from the
carrying amount of the loan and amortized to interest expense using the effective interest rate of 11.21% as of September 30,
2020. Xinda Holding (HK) repaid US$18.5 million loan during the nine months period ended September 30, 2020.
As of September 30, 2020, the loan was
secured by US$59.6 million restricted cash. Covenants of the syndicated loan facility included but not limited to: the consolidated
tangible net worth of the Company shall not at any time be less than US$650 million (or its equivalent), the ratio of the consolidated
total liabilities to consolidated total assets of the Company shall not at any time exceed 0.70:1.00, and interest cover in respect
of each relevant period shall not be less than 2.50:1.00. As of September 30, 2020, the interest cover was lower than 2.5, which
resulted in the breach of the loan covenant, and the consortium of banks has the right to declare the above loan be immediately
due and payable.
(v) In November 2019, the Company obtained a one-year short-term loan
of RMB40.0 million (equivalent to US$5.9 million) from Bank of Inner Mongolia. As of September 30, 2020, the Company pledged inventories
in amount of approximately US$39.1 million for the above loan and bills payable in amount of RMB107.0 million (equivalent to US$15.7
million) issued by Bank of Inner Mongolia.
(b) Non-current
|
|
September 30,
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
|
US$
|
|
|
|
US$
|
|
Secured loans (i)
|
|
|
1,529,511
|
|
|
|
1,742,389
|
|
Unsecured loans (ii)
|
|
|
677,699,888
|
|
|
|
380,637,597
|
|
Less: current portion
|
|
|
(76,276,389
|
)
|
|
|
(59,923,573
|
)
|
Total long-term bank loans, excluding current portion
|
|
|
602,953,010
|
|
|
|
322,456,413
|
|
As of September 30,
2020 and December 31, 2019, the Company's long-term bank loans (excluding the current portion of long-term bank loans) bear a weighted
average interest rate of 5.2% and 5.4% per annum, respectively.
(i) On December 26,
2018, the Company obtained a five-year secured loan of AED8.0 million (equivalent to US$2.2 million) from National Bank of Umm
Al Qaiwain at an interest rate of three-month EBOR (0.49% as of September 30, 2020) plus 3.75%. The long-term loan was secured
by an undated cheque of AED8.8 million (US$2.4 million) favouring the bank provided by Dubai Xinda. The cheque would not be cashed
by the bank unless Dubai Xinda defaults. Principal will be repaid in ten half-yearly installments of AED0.8 million (equivalent
to US$0.2 million) each. The Company repaid AED1.6 million (equivalent to US$0.4 million) during 2019.
(ii)
As of September 30, 2020 and December 31, 2019, the Company's long-term unsecured bank loans (excluding
the current portion of long-term bank loans) bear a weighted average interest rate of 5.2% and 5.5% per annum, respectively. The
Company’s long-term unsecured bank loans (excluding the current portion of long-term bank loans) will mature serially from
2021 to 2027.
In 2016 and 2017,
Sichuan Xinda obtained long term unsecured loans of RMB135.0 million (equivalent to US$19.8 million) from Bank of China at an annual
interest rate of 4.75%, and the loan balance as of September 30, 2020 was RMB75.0 million (equivalent to US$11.0 million), which
will be due in 2020. As of September 30, 2020, inventory turnover, account receivable turnover and revenues of Sichuan Xinda for
the nine-month period ended September 30, 2020 was below requirement of the financial covenants in the loan contract, which resulted
in the breach of the loan covenants. According to the loan contract, Bank of China has the right to declare the above loans be
immediately due and payable. The loan balance of RMB75.0 million (equivalent to US$11.0 million) was classified as short-term bank
loans in the condensed consolidated balance sheets as of September 30, 2020. The loan was repaid in October 2020.
Maturities on long-term
bank loans (including current portion) are as follows:
|
|
September 30, 2020
|
|
|
|
|
|
US$
|
|
|
Three months ended December 31, 2020
|
|
|
|
21,674,282
|
|
|
2021
|
|
|
|
50,308,223
|
|
|
2022
|
|
|
|
200,056,391
|
|
|
2023
|
|
|
|
173,654,430
|
|
|
2024
|
|
|
|
13,274,989
|
|
|
After 2024
|
|
|
|
220,261,083
|
|
|
Total
|
|
|
|
679,229,398
|
|
Note 8 – Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consist of the following:
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
|
US$
|
|
Payables for purchase of property, plant and equipment
|
|
|
19,589,896
|
|
|
|
12,445,494
|
|
Accrued freight expenses
|
|
|
23,641,542
|
|
|
|
17,665,998
|
|
Accrued interest expenses
|
|
|
16,998,811
|
|
|
|
15,650,965
|
|
Contract liabilities (i)
|
|
|
1,682,749
|
|
|
|
17,922,160
|
|
Non income tax payables
|
|
|
2,957,613
|
|
|
|
6,056,024
|
|
Others (ii)
|
|
|
18,758,605
|
|
|
|
16,809,747
|
|
Total accrued expenses and other current liabilities
|
|
|
83,629,216
|
|
|
|
86,550,388
|
|
(i) Contract liabilities mainly represent the
advance received from customers in the PRC for the finished goods and raw materials purchases. The change in contract liabilities
primarily represents the cash received, less amounts recognized as revenues during the period.
(ii) Others mainly
represent accrued payroll and employee benefits, accrued audit and consulting fees, electricity fee and other accrued miscellaneous
operating expenses.
Note 9 – Related Party Transactions
The related party transactions are summarized
as follows:
|
|
Three-Month Period Ended September 30,
|
|
Nine-Month Period Ended September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
Transactions with related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues resulting from transactions with a related party:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to Macromolecule Composite Materials
|
|
|
—
|
|
|
|
734,895
|
|
|
|
—
|
|
|
|
1,040,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing transactions with related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-free advances from Mr. Jie Han
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,920,049
|
|
Repayment of interest-free advances from Mr. Jie Han
|
|
|
|
|
|
|
(116,802
|
)
|
|
|
—
|
|
|
|
(116,802
|
)
|
Interest-free advances from Mr. Jie Han’s son
|
|
|
—
|
|
|
|
8,760,147
|
|
|
|
—
|
|
|
|
8,760,147
|
|
Repayment of interest-free advances from Mr. Jie Han’s son
|
|
|
(429,117
|
)
|
|
|
|
|
|
|
(429,117
|
)
|
|
|
|
|
Interest-free advances from senior management employee in HLJ Xinda Group and Sichuan Xinda
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
275,234
|
|
Repayment of interest-free advances from senior management employees in HLJ Xinda Group and Sichuan Xinda
|
|
|
—
|
|
|
|
(292,005
|
)
|
|
|
—
|
|
|
|
(4,679,484
|
)
|
Interest-free advances from Mr. Qingwei Ma
|
|
|
114,431
|
|
|
|
4,526,076
|
|
|
|
1,258,743
|
|
|
|
4,526,076
|
|
Repayment of interest-free advances from Mr. Qingwei Ma
|
|
|
(1,495,902
|
)
|
|
|
(730,012
|
)
|
|
|
(2,640,214
|
)
|
|
|
(730,012
|
)
|
Interest-free advances from Macromolecule Composite Materials (i)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
63,488,212
|
|
Repayment of interest-free advances from Macromolecule Composite Materials (i)
|
|
|
—
|
|
|
|
(2,935,570
|
)
|
|
|
—
|
|
|
|
(63,017,445
|
)
|
Total financing transactions with related parties
|
|
|
(1,810,588
|
)
|
|
|
9,211,834
|
|
|
|
(1,810,588
|
)
|
|
|
11,425,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) On December 26,
2018, Shanghai Sales set up Heilongjiang Xinda Macromolecule Composite Materials Company Limited (“Macromolecule Composite
Materials”). On April 22, 2019, Shanghai Sales transferred 97.5% equity interest in Macromolecule Composite Materials to
Harbin Shengtong Engineering Plastics Co., Ltd. ("Harbin Shengtong"). Mr. Xigang Chen, who was the general manager of
Sichuan Xinda, was the general manager and also the principal shareholder of Harbin Shengtong.
Since Mr. Xigang Chen
resigned from Sichuan Xinda on August 5, 2019, Macromolecule Composite Materials had ceased to be a related party of the Company.
The related party balances are summarized
as follows:
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
|
US$
|
|
|
|
US$
|
|
Amounts due to related parties:
|
|
|
|
|
|
|
|
|
Mr. Jie Han (the Chairman and Chief Executive Officer)
|
|
|
12,804,511
|
|
|
|
12,499,642
|
|
Mr. Jie Han’s wife
|
|
|
3,201,869
|
|
|
|
3,137,539
|
|
Mr. Jie Han’s son
|
|
|
9,104,125
|
|
|
|
9,317,393
|
|
Mr. Qingwei Ma (Chief Operating Officer)
|
|
|
(243,462
|
)
|
|
|
1,146,756
|
|
Senior management employee in HLJ Xinda Group
|
|
|
154,262
|
|
|
|
150,589
|
|
Total amounts due to related parties
|
|
|
25,021,305
|
|
|
|
26,251,919
|
|
Note 10– Income tax
Pursuant to an approval
from the local tax authority in July 2013, Sichuan Xinda, a subsidiary of China XD, became a qualified enterprise located in the
western region of the PRC, which entitled it to a preferential income tax rate of 15% from January 1, 2013 to December 31, 2020.
Under the current laws of Dubai, Dubai Xinda, a subsidiary of China XD, is exempted from income taxes.
The effective income
tax rates for the nine-month periods ended September 30, 2020 and 2019 were negative 2.0% and 14.8%, respectively.
The effective income
tax rate decreased from 14.8% for the nine-month period ended September 30, 2019 to negative 2.0% for the nine-month period ended
September 30, 2020, primarily due to the increased loss before income taxes from Dubai Xinda and decreased income before taxes
from HLJ Xinda Group and Sichuan Xinda. The effective income tax rate for the nine-month period ended September 30, 2020 differs
from the PRC statutory income tax rate of 25% primarily due to the reversal of the unrecognized
tax benefits accrued in 2014, 75% additional deduction of R&D expenses of the major PRC operating entities, and Sichuan Xinda's
preferential income tax rate.
US$6,408,120 previously
unrecognized tax benefits accrued in year 2014 and the related accrued interest amounting to US$ 5,220,087 were reversed due to
the expiration of five-year tax assessment period on May 31, 2020. As of September 30, 2020, the unrecognized tax benefits were
US$32,887,956 and the interest relating to unrecognized tax benefits was US$12,724,594, of which the
unrecognized tax benefits in year 2015 amounting to US$7,362,633 and related accrued interest amounting to US$5,295,474 were classified
as current liabilities as the five-year tax assessment period will expire on May 31, 2021. No penalties expense related
to unrecognized tax benefits were recorded. The Company is currently unable to provide an estimate of a range of the total amount
of unrecognized tax benefits that is reasonably possible to change significantly within the next twelve months.
Note 11 – Deferred income
On
January 26, 2015, the Company entered into a memorandum and a fund support agreement (the "Agreement") with the People's
Government of Shunqing District, Nanchong City, Sichuan Province ("Shunqing Government") pursuant to which Shunqing Government,
through its investment vehicle, extended to the Company RMB350 million (equivalent to US$51.4 million) to support the construction
of the Sichuan plant, which has been received in full in the form of government repayment of bank loans on behalf of the Company.
In
addition, the Company has received RMB333.2 million (equivalent to US$48.9 million) from Shunqing Government and RMB6.4 million
(equivalent to US$0.9 million) from Ministry of Finance of the People's Republic of China to support the construction and RMB7.5
million (equivalent to US$1.1 million) special funds of ministerial key research projects from Ministry of Science and Technology
of PRC as of September 30, 2020.
The
Company has also received RMB45.0 million (equivalent to US$6.6 million) from Harbin Bureau of Finance to support the construction
of the 300,000 metric tons of biological composite materials project in Heilongjiang as of September 30, 2020.
Since
the funding is related to the construction of long-term assets, the amounts were recognized as government grant, which is included
in deferred income on the consolidated balance sheets, and to be recognized as other income in the consolidated statements of comprehensive
income (loss) over the periods and in the proportions in which depreciation expense on the long-term assets is recognized.
A
cumulative RMB145.0 million (equivalent to US$21.2 million) government grants have been amortized as other income proportionate
to the depreciation of the related assets, of which RMB29.5 million (equivalent to US$4.3 million) was amortized in the nine-month
period ended September 30, 2020.
The Company also received
RMB36.0 million (equivalent to US$5.3 million) from Shunqing Government with respect to interest subsidy for bank loans as of September
30, 2020. A cumulative RMB16.4 million (equivalent to US$2.4 million) government grants have been amortized as other income in
line with the amount of related loan interest accrued.
Note 12 – Other non-current liabilities
|
|
September 30
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
|
US$
|
|
|
|
US$
|
|
Income tax payable-noncurrent (i)
|
|
|
81,210,743
|
|
|
|
86,414,852
|
|
Deferred income tax liabilities
|
|
|
3,475,112
|
|
|
|
4,613,524
|
|
Total other non-current liabilities
|
|
|
84,685,855
|
|
|
|
91,028,376
|
|
(i) Income tax payable-noncurrent represents
the repatriation tax, the accumulative balance of unrecognized tax benefits since 2016 and related accrued interest. According
to the Tax Cuts and Jobs Act enacted on December 22, 2017, the management recognized the amount of U.S. tax corporate income
tax is US$70,965,148 based on the deemed repatriation to the United States of accumulated earnings mandated by the U.S. tax reform,
US$22,708,848 of which due payable within one year was classified as current liabilities.
Note 13 – Noncontrolling interests
On January 22, 2020, a third party investor
acquired 36.21% and 38.08% of the equity interest of the Company’s two wholly owned PRC subsidiaries at a consideration of
RMB325.0 million (equivalent to US$47.7 million). The Company shall redeem 50% of the equity interest owned by the noncontrolling
shareholder on January 21, 2024 and the remaining 50% on January 21, 2025 at a total redemption value of RMB325.0 million. The
noncontrolling shareholder was also entitled to an interest at 1.5% per annum. The Company has pledged its 63.79% and 61.92% equity
interest of the two subsidiaries to the noncontrolling shareholder as a guarantee for its obligation on the redemption. The mandatorily
redeemable noncontrolling interests were recorded as a liability on the unaudited condensed consolidated balance sheet and initially
recorded at the fair value of US$45.9 million and were subsequently carried at the present value of the redemption value.
In April 2020, the Company increased its capital
contribution to one of the subsidiaries, and the equity interest owned by the Company has increased from 61.92% to 65.62%, the
equity interest owned by noncontrolling shareholder has decreased from 38.08% to 34.38%.
On June 29, 2020, the Company entered into
supplementary agreements with the noncontrolling shareholder, pursuant to which, the redemption provision, the 1.5% per annum interest
payable to the noncontrolling shareholder and the guarantee provision in the original investment agreements were cancelled. The
substantial modification of terms was accounted as an extinguishment with no extinguishment gains or losses recognized. The noncontrolling
interest were reclassified as an equity instrument. As of September 30, 2020, the carrying value of the noncontrolling interests
was US$48.0 million.
Note 14 – Stockholders' equity
The changes of each caption of stockholders'
equity for the nine-month period ended September 30, 2020 are as follows:
|
|
Series B
Preferred Stock
|
|
Common Stock
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Number
of Shares
|
|
Amount
|
|
Number
of Shares
|
|
Amount
|
|
Treasury Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Other Comprehensive
Loss
|
|
Noncontrolling Interest
|
|
Total
Stockholders'
Equity
|
|
|
|
|
US$
|
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
Balance as of January 1, 2020
|
|
|
1,000,000
|
|
|
|
100
|
|
|
|
66,948,841
|
|
|
|
6,697
|
|
|
|
(92,694
|
)
|
|
|
184,208,447
|
|
|
|
720,159,368
|
|
|
|
(67,907,807
|
)
|
|
|
—
|
|
|
|
836,374,111
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(31,695,596
|
)
|
|
|
—
|
|
|
|
159,536
|
|
|
|
(31,536,060
|
)
|
Other comprehensive loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,418,087
|
|
|
|
160,258
|
|
|
|
20,578,345
|
|
Stock based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,188,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,188,240
|
|
Issuance of common stock upon vesting of unrestricted stocks
|
|
|
|
|
|
|
|
|
|
|
3,600,000
|
|
|
|
360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
360
|
|
Contribution from noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
47,727,474
|
|
|
|
47,727,474
|
|
Balance as of September 30, 2020
|
|
|
1,000,000
|
|
|
|
100
|
|
|
|
70,548,841
|
|
|
|
7,057
|
|
|
|
(92,694
|
)
|
|
|
188,396,687
|
|
|
|
688,463,772
|
|
|
|
(47,489,720
|
)
|
|
|
48,047,268
|
|
|
|
877,332,470
|
|
Note 15 – Stock based compensation
On January 10, 2020,
the Board of Directors approved the adoption of 2020 Stock Option / Stock Issuance Plan (the "2020 Plan"), under which
13,000,000 shares of common stock are reserved for issuance. The 2020 Plan provides for the grant of stock options and stock issuances
to employees, directors and independent contractors who provide services to the Company and/or its affiliates.
Non-vested shares
On February 20, 2020,
the Company's Board of Directors approved the grant of 3,000,000 non-vested shares to Mr. Jie Han and an employee with a performance
condition that the Company or its subsidiaries receive certain amount of bank credit prior to April 30, 2020 and complete certain
amount of drawdown from such credit line prior to June 30, 2020. The awards will be forfeited if the performance condition is not
met. As of June 30, 2020, the performance condition has not been met and the awards were forfeited.
On February 20, 2020,
the Company's Board of Directors approved the grant of 1,000,000 non-vested shares to two nonemployee consultants providing certain
financing advisory service for the Company. As of September 30, 2020, the service has not been rendered and the service agreement
was cancelled and the awards were forfeited.
On August 26, 2020,
the Company's Board of Directors approved the grant of 3,600,000 shares to three executives, one senior management and one consultant
for their service to the Company. The shares are vested immediately upon issuance.
A summary of the non-vested
shares activity for the nine-month period ended September 30, 2020 is as follows:
|
|
Number of Nonvested
Shares
|
|
Weighted Average
Grant date Fair Value
|
|
|
|
|
|
|
|
|
|
US$
|
|
|
Outstanding as of December 31, 2019
|
|
|
|
—
|
|
|
|
—
|
|
|
Granted
|
|
|
|
7,600,000
|
|
|
|
1.34
|
|
|
Vested
|
|
|
|
(3,600,000
|
)
|
|
|
1.16
|
|
|
Forfeited
|
|
|
|
(4,000,000
|
)
|
|
|
1.50
|
|
|
Outstanding as of September 30, 2020
|
|
|
|
—
|
|
|
|
—
|
|
The Company recognized
US$4,188,600 and nil compensation expense in general and administrative expenses relating to the non-vested shares for the three
months and nine months periods ended September 30, 2020 and 2019, respectively. As of September 30, 2020, there was nil unrecognized
compensation cost relating to the non-vested shares.
Note 16 - Earnings per share
Basic and diluted earnings per share are calculated as follows:
|
|
Three-Month
Period Ended
September 30,
|
|
Nine-Month
Period Ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
Net income (loss) attributable to China XD Plastics Company Limited
|
|
|
(38,232,913
|
)
|
|
|
16,965,213
|
|
|
|
(31,695,596
|
)
|
|
|
68,057,245
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings allocated to participating Series D convertible preferred stock
|
|
|
—
|
|
|
|
(3,834,137
|
)
|
|
|
—
|
|
|
|
(15,967,004
|
)
|
Net income for basic and diluted earnings per share
|
|
|
(38,232,913
|
)
|
|
|
13,131,076
|
|
|
|
(31,695,596
|
)
|
|
|
52,090,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic and diluted earnings per share
|
|
|
67,916,583
|
|
|
|
51,818,406
|
|
|
|
67,277,308
|
|
|
|
51,241,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
(0.56
|
)
|
|
|
0.25
|
|
|
|
(0.47
|
)
|
|
|
1.02
|
|
The following table summarizes potentially
dilutive securities excluded from the calculation of diluted earnings per share for the three-month periods and nine-month periods
ended September 30, 2020 and 2019 because their effects are anti-dilutive:
|
|
Three-Month Period Ended
September 30,
|
|
Nine-Month Period Ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issuable upon conversion of Series D convertible preferred stock
|
|
|
—
|
|
|
|
15,130,435
|
|
|
|
—
|
|
|
|
15,706,960
|
|
Note 17 - Commitments and contingencies
(1) Sichuan plant construction and equipment
purchase
On March 8,
2013, Xinda Holding (HK) entered into an investment agreement with Shunqing Government, pursuant to which Xinda Holding (HK)
will invest RMB1.8 billion in property, plant and equipment and approximately RMB0.6 billion in working capital, for the
construction of Sichuan plant. As of September 30, 2020, the Company has a remaining commitment of RMB38.3 million
(equivalent to US$5.6 million) mainly for facility construction.
In September
2016, Sichuan Xinda Enterprise Group Co., Ltd. ("Sichuan Xinda") entered into equipment purchase contracts with
Harbin Hailezi Science and Technology Co., Ltd. ("Hailezi") for a consideration of RMB17.0 million (equivalent to
US$2.5 million) to purchase storage facility and testing equipment. Afterward, Sichuan Xinda cancelled two contracts with
Hailezi for a consideration of RMB1.6 million (equivalent to US$0.2 million). As of September 30, 2020, Sichuan Xinda prepaid
RMB6.0 million (equivalent to US$0.9 million) and has a remaining commitment of RMB9.4 million (equivalent to US$1.4
million)
On October 20, 2016,
Sichuan Xinda entered into an equipment purchase agreement purchase contract with Peaceful Treasure Limited ("Peaceful")
for a total consideration of RMB89.8 million (equivalent to US$13.2 million) to purchase certain production and testing equipment.
As of September 30, 2020, the Company has a commitment of RMB55.9 million (equivalent to US$8.2 million).
On November 15, 2016
and February 20, 2017, Sichuan Xinda entered into decoration contracts with Beijin Construction to perform indoor and outdoor decoration
work for a consideration of RMB240.5 million (equivalent to US$35.3 million). On June 10, 2017, Sichuan Xinda entered into another
decoration contract with Beijin Construction to perform ground decoration work for a consideration of RMB23.8 million (equivalent
to US$3.5 million). As of September 30, 2020, the Company has a remaining commitment of RMB141.5 million (equivalent to US$20.8
million).
Pursuant to the
Nanchong Project mentioned in Note 6 (i), Sichuan Xinda entered into equipment purchase contracts with Hailezi for a
consideration of RMB2,242.8 million (equivalent to US$329.3 million) to purchase production equipment and testing equipment
in March 2017. By the end of June 2017, Sichuan Xinda was about to launch a system including MES, SAP, ERP and CRM which
caused the equipment of original contracts with Hailezi cannot meet the production requirement. Thus the original contracts
have been partially terminated with with the uncancelled contract amount to be RMB 19.9 million (equivalent to US$2.9
million). As of September 30, 2020, Sichuan Xinda prepaid RMB19.9 million (equivalent to US$2.9 million) and has a remaining
commitment of RMB2.0 million (equivalent to US$0.3 million).
In connection with the Nanchong Project, on
21 June 2018, Sichuan Xinda entered into another equipment purchase contracts with Hailezi to purchase production equipment and
testing equipment for a consideration of RMB1.9 billion (equivalent to US$279 million). Pursuant to the contracts with Hailezi,
Sichuan Xinda have prepaid RMB1.71 billion (equivalent to US$251.1 million) at the end of September 2020, and has a remaining commitment
of RMB190 million (equivalent to US$27.9 million).
(2) Heilongjiang plant construction and
equipment purchase
In connection with the
equipment purchase contracts with Hailezi signed On September 26, 2016 and February 28, 2017 and September 25, 2019 to purchase
storage facility and other equipment mentioned in Note 6 (i), HLJ Xinda Group has a remaining commitment of RMB75.2 million (equivalent
to US$11 million) as of September 30, 2020.
In connection with the
HLJ project, on June 25, 2018 and July 12, 2018, HLJ Xinda Group entered into two equipment purchase contracts with Hailezi to
purchase production equipment, which will be used for 300,000 metrics tons of biological based composite material, located in Harbin,
for a consideration of RMB1,906.8 million (equivalent to US$280 million). Pursuant to the contracts with Hailezi, HLJ Xinda Group
has a remaining commitment of RMB1,366.8 million (equivalent to US$200.7 million) As of September 30, 2020.
In connection with the
equipment purchase contracts with Hailezi for Qinling Road Project and Jiangnan Road Project mentioned in Note 6 (i), the Company
has remaining commitments of RMB32.4 million (equivalent to US$4.8 million) and RMB142.7 million (equivalent to US$21.0 million)
for Qinling Road Project and Jiangnan Road Project respectively.
(3) Dubai equipment purchase
On May 31, 2019, Dubai Xinda entered into an
equipment purchase contract with Peaceful for a total consideration of US$18.8 million. As of September 30, 2020, the Company has
a remaining commitment of US$1.8 million.
(4) Xinda CI (Beijing) office building decoration
On March 30, 2017, Xinda CI (Beijing)
Investment Holding Co., Ltd. ("Xinda Beijing Investment") entered into a decoration contract with Beijing Fangyuan
Decoration Engineering Co., Ltd for a total consideration of RMB5.8 million (equivalent to US$0.9 million) to decorate office
building. As of September 30, 2020, the Company has a remaining commitment of RMB3.7 million (equivalent to US$0.5
million).
On June 9, 2017, Xinda
CI (Beijing) entered into a decoration contract with Beijing Zhonghongwufang Stone Co., Ltd for a total consideration of RMB1.2
million (equivalent to US$0.2 million) to decorate office building. As of September 2020, the Company has a remaining commitment
of RMB0.6 million (equivalent to US$0.1 million).
(5) Guarantees
On December 25, 2018, HLJ Xinda Group, Sichuan
Xinda and Mr. Jie Han provided guarantee to Shanghai Sales obtaining a one-year loan of RMB500.0 million (equivalent to US$73.4)
from Longjiang Bank, Harbin Branch with an annual interest rate of 6.09% from December 25, 2018 to December 24, 2019. On December
24, 2019, the loan was extended to October 23, 2020. If Shanghai Sales does not repay the above loan when due, HLJ Xinda Group,
Sichuan Xinda and Mr. Jie Han shall be obliged to repay the RMB500.0 million loan. The loan was repaid early by Shanghai Sales
in April 2020.
On April 15, 2019, Sichuan Xinda provided guarantee
to Shanghai Sales obtaining a one-year loan of RMB800.0 million (equivalent to US$117.5 million) from Longjiang Bank, Harbin Branch
with an annual interest rate of 6.09% from April 15, 2019 to April 14, 2020. If Shanghai Sales does not repay the above loan when
due, Sichuan Xinda shall be obliged to repay the RMB800.0 million loan. The loan was repaid by Shanghai Sales in April 2020.
On December 3, 2019, HLJ Xinda Group provided
guarantee to Macromolecule Composite Materials obtaining a one-year loan of RMB612.2 million (equivalent to US$89.9 million) from
Longjiang Bank, Harbin Branch with an annual interest rate of 6.25%. If Macromolecule Composite Materials does not repay the above
loan when due, HLJ Xinda Group shall be obliged to repay the RMB612.2 million loan. The loan was repaid early in April 2020.
On September
28, 2020, Sichuan Xinda provided guarantee to Macromolecule Composite Materials obtaining a three-month loan of RMB700.0 million
(equivalent to US$102.8 million) from Longjiang Bank, Harbin Branch with an annual interest rate of 5.95%. If Macromolecule Composite
Materials does not repay the above loan when due, Sichuan Xinda shall be obliged to repay the RMB700.0 million loan.
(6) Legal proceedings
The
Company and its board of directors were named as defendants in seven lawsuits filed from July to October, 2020 in connection with
the proposed going-private transaction. There is a possibility that a loss may have been incurred, as the
Company is unable to estimate the possible loss or range of loss at this early stage in the case, no loss contingency was accrued
as of September 30, 2020.
Note 18 - Revenues
Revenues consist of the following:
|
|
Three-Month Period Ended
September 30,
|
|
Nine-Month Period Ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
Modified Polyamide 66 (PA66)
|
|
|
137,530,694
|
|
|
|
120,234,670
|
|
|
|
334,833,512
|
|
|
|
296,372,085
|
|
Modified Polyamide 6 (PA6)
|
|
|
89,690,836
|
|
|
|
78,940,503
|
|
|
|
206,252,005
|
|
|
|
250,529,646
|
|
Plastic Alloy
|
|
|
17,739,146
|
|
|
|
66,353,485
|
|
|
|
35,883,608
|
|
|
|
200,901,936
|
|
Modified Polypropylene (PP)
|
|
|
14,924,727
|
|
|
|
32,666,069
|
|
|
|
41,194,835
|
|
|
|
110,518,373
|
|
Modified Acrylonitrile Butadiene Styrene (ABS)
|
|
|
4,062,045
|
|
|
|
12,437,078
|
|
|
|
11,439,860
|
|
|
|
40,662,342
|
|
Polyoxymethylenes (POM)
|
|
|
3,952
|
|
|
|
2,053,799
|
|
|
|
880,306
|
|
|
|
6,953,161
|
|
Polyphenylene Oxide (PPO)
|
|
|
—
|
|
|
|
5,490,232
|
|
|
|
—
|
|
|
|
31,482,628
|
|
Polylactide (PLA)
|
|
|
435,469
|
|
|
|
17,525,906
|
|
|
|
793,506
|
|
|
|
46,789,233
|
|
Polyethylene (PE)
|
|
|
23,310,911
|
|
|
|
4,103,483
|
|
|
|
24,747,961
|
|
|
|
7,707,560
|
|
Semi-finished goods
|
|
|
—
|
|
|
|
33,062,822
|
|
|
|
58,015,074
|
|
|
|
145,362,837
|
|
Others
|
|
|
2,357,035
|
|
|
|
291,044
|
|
|
|
4,075,813
|
|
|
|
419,177
|
|
Total Revenue
|
|
|
290,054,815
|
|
|
|
373,159,091
|
|
|
|
718,116,480
|
|
|
|
1,137,698,978
|
|
The following table provides sales by major
customer group for the three-month and nine-month periods ended September 30, 2020 and 2019:
|
|
Three-month Period Ended
September 30,
|
|
Nine-month Period Ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
Distributor
|
|
|
191,032,834
|
|
|
|
312,919,940
|
|
|
|
575,351,561
|
|
|
|
918,602,515
|
|
Direct customers
|
|
|
96,664,946
|
|
|
|
59,948,107
|
|
|
|
138,689,106
|
|
|
|
218,677,286
|
|
Others
|
|
|
2,357,035
|
|
|
|
291,044
|
|
|
|
4,075,813
|
|
|
|
419,177
|
|
Total
|
|
|
290,054,815
|
|
|
|
373,159,091
|
|
|
|
718,116,480
|
|
|
|
1,137,698,978
|
|
Note 19 - Leases
As of September 30, 2020, the Company had operating
leases for land use rights and office with remaining terms expiring from 2022 through 2085. The weighted average remaining lease
term excluding land use rights located in PRC as of September 30, 2020 was 16.6 years. Weighted average discount rate used in the
calculation of the lease liabilities was 6.7%. The discount rate reflects the estimated incremental borrowing rate, which includes
an assessment of the credit rating to determine the rate that the Company would have to pay to borrow, on a collateralized basis
for a similar term, an amount equal to the lease payments in a similar economic environment.
Lease cost for the three-month and nine-month
periods ended September 30, 2020 and 2019 is as follows:
|
|
Three-Month Period
Ended
September 30,
|
|
Nine-Month Period
Ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
Operating lease cost
|
|
|
576,131
|
|
|
|
424,227
|
|
|
|
1,723,919
|
|
|
|
1,271,455
|
|
Short-term lease cost
|
|
|
171,238
|
|
|
|
98,910
|
|
|
|
539,733
|
|
|
|
432,124
|
|
Total lease cost
|
|
|
747,369
|
|
|
|
523,137
|
|
|
|
2,263,652
|
|
|
|
1,703,579
|
|
As of September 30, 2020, the maturities
of the operating lease liabilities are as follows:
|
|
Remaining Lease Payments
US$
|
|
Nine months ended September 30, 2020
|
|
|
346,798
|
|
2021
|
|
|
1,407,755
|
|
2022
|
|
|
1,408,112
|
|
2023
|
|
|
1,423,926
|
|
2024
|
|
|
1,443,233
|
|
Thereafter
|
|
|
20,566,236
|
|
Total remaining lease payments
|
|
|
26,596,060
|
|
Less: imputed interest
|
|
|
(10,799,773
|
)
|
Total operating lease liabilities
|
|
|
15,796,287
|
|
Less: current portion
|
|
|
(1,639,613
|
)
|
Non-current operating lease liabilities
|
|
|
14,156,674
|
|
Weighted-average remaining lease term
|
|
16.6 years
|
|
Weighted-average discount rate
|
|
|
6.7
|
%
|
Supplemental cash flow information related
to leases is as follows:
|
|
Three-Month Period Ended
September 30,
|
|
Nine-Month Period Ended
September 30
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
US$
|
|
US$
|
|
US$
|
|
US$
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
|
125,033
|
|
|
|
28,589
|
|
|
|
791,096
|
|
|
|
1,707,618
|
|
Note 20
– Subsequent event
On November 5, 2020, the Company held a special
meeting of stockholders, at which the Company’s stockholders voted, among other things, in favor of the proposal to adopt
the previously announced agreement and plan of merger (the “Merger Agreement”), dated as of June 15, 2020, by and among
the Company, Faith Dawn Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent”),
and Faith Horizon Inc., a Nevada corporation and wholly owned subsidiary of Parent (“Merger Sub”), providing for the
merger of the Merger Sub with and into the Company, with the Company continuing as the surviving corporation and as a wholly-owned
subsidiary of Parent (the “Merger”).
The Merger remains subject to various customary
closing conditions as set forth in the Merger Agreement. If and when completed, the proposed merger would result in the Company
becoming a privately-held company and the common stock of the Company would no longer be listed on the NASDAQ Global Market or
any other stock exchange, and price quotations with respect to shares of Company common stock in the public market will no longer
be available.